Russian oil tankers position close to India amid lack of clarity on US FTA

Officials of Indian refiners evaluating Russian crude alongside other grades from Brazil, Angola and UAE

Russia may continue as India’s largest supplier of crude oil at least for the next few months because refiners here will receive substantial volumes from the Eurasian country in the absence of clarity on the proposed United States-India trade deal, according to interviews with legal experts and market participants, and ship-tracking data. 

Moreover, discounts on higher-quality Russian oil are twice as much as those for dirty Venezuelan oil, which is readily available. “The deal with the United States (US), recently announced, does not automatically impose a ban on Indian entities acquiring Russian crude oil or limit their purchase,” said Shivam Sinha, partner, Delhi-based law firm Sagus Legal. 

“It signals diplomatic and policy-level understanding between the two countries aiming to expand bilateral commerce. Yet such declarations alone generate no enforceable duties capable of curtailing private-sector imports.” 

Perhaps that explains why India’s biggest refiners received six cargos, including one partial, of Russian oil in February. They were the medium and sour Urals grades, the best value proposition and profit-generating grade for Indian refiners today. That’s against 40 cargos in all of January, including nine partial cargos, and predominantly Urals, according to the shipping data accessed by Business Standard on market intelligence agency Kpler. 

Suppliers too are optimistic, with over 20 million barrels of Russian oil stored in tankers located in the Arabian sea, Kpler analyst Sumit Ritolia said. That compares with 30 million barrels in January, with the decline reflecting some sales to India and China. Floating storage is also much lower than around 8 million barrels in January, prior to US sanctions in October. 

Most of the floating storage will eventually end up in India, Ritolia said, predicting that over 1.2 million barrels per day (bpd) of Russian oil will come to India in March. 

Oil from Russia averaged 1.35 million bpd in the first four days of February compared to 1.25 million bpd in January — though they may not be strictly comparable for now, the Kpler data showed. 

Senior officials in refining told Business Standard in the absence of clarity from New Delhi on American President Donald Trump’s tweet or in the absence of official communication Russian crudes were being evaluated alongside other grades from Brazil, Angola, or the United Arab Emirates. 

“The FTA (free-trade agreement) wording may sound more restrictive, but the underlying reality will not undermine India’s sovereign energy decisions,” said Russell A Stamets, partner, Circle Of Counsels. “No one can or will bar India from pursuing its energy goals as it wishes.” 

Neither Prime Minister Narendra Modi nor Commerce Minister Piyush Goyal made a mention of any crude oil trades in their statements about the Indo-US FTA as against Trump stating in Truth Social that India would stop buying Russian oil and buy American and Venezuelan oil. 

Venezuelan oil: Quality issues 

Despite Trump pitching for Venezuelan oil, Indian refiners told Business Standard the commodity was not viable at discounts offered by Vitol and Trafigura, which are traders. In the past, the Indian Customs data showed Venezuelan oil cheaper by over $10 a barrel over West Asian or Russian grades. 

The large discount was because of poor quality — heavy, high sulphur, acidic crude — and they were tough to process.

But the current discounts on the resale of Venezuelan oil, approved by Washington, are only $5-6 per barrel, a top trader at a state refiner said. 

“Urals is available at over $10 per barrel discounts,” he said. The available data also shows New Delhi not intervening in decisions on sourcing crude oil. 

Another trader from a state refiner said New Delhi had neither told them to reduce Russian oil import nor encouraged them to buy more US fuel. For now, economics dictates purchase decisions, he added. That explains why Indian Oil Corporation imported some of its highest volumes of Russian oil since December, and US exports to India in January and February averaged only 180,000 bpd, a third of the October volumes, according to the shipping data. 

Russian flows 

Private-sector refiners Reliance Industries and Rosneft-run Nayara Energy, and state-run refiner Indian Oil received two cargos each from Russia in the first four days of February. Cargos bought by Reliance had been shipped in late November and took an unusually long voyage of 70 days, nearly thrice the usual time taken for a Russian oil tanker to discharge at an Indian port, according to the data from Kpler, indicating the oil was supplied from storage. The names of Reliance Industries’ sellers have not been revealed. The firm’s spokesperson was not available for comment. 

Nayara Energy, sanctioned by the European Union, and state-run refiner Indian Oil Corporation received two each this month, with Redwood Global mentioned as the supplier for Indian Oil and Nayara. Indian Oil’s cargos were loaded on December 26.