India's rivals China, Turkey seek cheaper Urals, capping oil price rise

This comes as Trump-Putin meet remains inconclusive

China and Turkey are boosting purchases of discounted Russian oil, offered at better rates to them for deliveries in September, October and November. This comes after Trump cut off India’s access to the crude by the end of the month, industry officials said, and market data showed.

 

China has increased purchases of Russian Urals crude oil sixfold compared to the first half of this year while India has had to reduce it to nil after Trump slapped secondary tariffs of 25 per cent from August 27 on most Indian exports as penalty for using Russian oil, according to industry data.

 

Indian refiners had to opt for alternative Middle East, US and West African grades at higher costs of $2-$3 per barrel compared to Russian deliveries. But China slashed purchases of expensive term Saudi crude oil to the lowest level since April after it secured access to Russian oil, industry officials said.

 

India is still a very important market for Russia, refining officials said.

   

Indian refiners, led by Reliance Industries and Nayara Energy, sourced 1.3 million barrels per day (bpd) of medium, sour Urals grade this year till date compared to just 51,000 bpd for China and 280,000 bpd for Turkey. This reflects the wide gap that China and Turkey alone will be unable to plug, according to market intelligence agency Kpler’s ship-tracking data.

 

For now, Trump has made it easier for China to source sanctioned crude oils — China is also free to buy sanctioned Iranian oil, he said on a previous occasion.

 

The three biggest buyers of Russian fossil fuels were China (euro 78 billion ($90 billion)), India (euro 49 billion), and Turkey (euro 34 billion) in the third year of the Russian invasion of Ukraine, according to Finnish think tank CREA.

 

While the temporary pause in Indian purchases of Russian oil for September deliveries eliminates hundreds of millions of dollars in monthly savings from discounted Russian crude for Indian refiners, the entry of Chinese buyers has kept the lid on crude oil prices.

 

“Our oil imports from Russia have helped in keeping crude prices stable for every country, particularly the US. President Trump should thank Indian refiners, not try to punish them,” said Narendra Taneja, a leading oil expert.

 

European benchmark Brent, which is used to price Russian oil, is trading at $66-67/barrel levels despite India’s pause in Russian purchases. In early 2022, after Russia invaded Ukraine oil prices had moved up sharply to over $120 a barrel.

 

A $10/barrel increase in crude oil prices would increase India’s oil import bill by about $13-14 billion, according to Prashant Vasisht, senior vice-president at ratings agency ICRA.

 

Oil supplies are plentiful. “Our updated balances show a sustained oversupply of around 2 million bpd through to the end of 2026,’’ Kpler added. Its new 12-month forecast for Dated Brent averages $60.30/bbl.

   

Post Trump-Putin meet

   

Trump did not offer a clear stance on doing away with secondary tariffs after his meeting with Russian President Vladimir Putin on Friday but suggested he will not impose similar tariffs on China for the next 2-3 weeks.

 

China, unlike India, has always been sourcing sanctioned crude oils from Iran and Venezuela, with all sanctioned crudes accounting for a third of its total crude oil imports of 11.3 million bpd. This is over twice that of India's total crude oil imports.

 

Chinese companies have bought 15 million barrels of Urals for arrival in September to November, UK-based information provider Energy Intelligence reported.

 

Chinese purchases of seaborne Russian Urals are running at 310,000 bpd for October arrival presently, compared to 50,000 bpd in January-July this year, UK-based commodity price assessment agency Argus reported.

 

Indian state-run refiners are seeking bigger discounts compared to the prevailing $1.5-$2 levels on Urals grade, calculated off Dated Brent on delivered basis. But with China now ready to buy Urals it’s not clear the extent to which Russian traders will accede to Indian requests, two state run refining officials said.

 

However, Urals is still expensive for small Chinese refiners because of longer distances and higher freight compared to Iranian oil, limiting their appetite. And, Turkey’s stomach is small — which may still provide an opening for better terms for Indian refiners.