 "Oil")
Indian refiners would continue to source Russian oil at discounts negotiated earlier, thereby negating the impact of the latest cut in crude oil production announced by the Opec+ group of nations, officials said on Tuesday.
Indian refiners have been assured of uninterrupted crude supplies at the existing rates for the time being, they said. "There were a lot of reports of changes in India's buying patterns after the global price cap took hold. But Indian refiners have continued benefiting from favorable purchase agreements," a senior official said.
An intergovernmental organisation of 13 major oil-producing nations, such as Saudi Arabia, Iran, Iraq, and Venezuela, among others, Opec has been called a ‘cartel’ by economists. Member countries accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s ‘proven’ oil reserves as of 2018.
Russia was the largest source of crude for India for the sixth straight month in March, supplying 35 per cent of all crude imports, according to London-based commodity data analytics provider Vortexa, which tracks ship movements to estimate imports.
India imported an all-time high of 1.64 million barrels per day (bpd) from Russia in March, up from 1.6 million bpd in February, 1.4 million bpd in January and 1 million in December, according to Vortexa.
However, imports from Russia have grown at a slower pace in recent months. Industry executives attributed this to Indian refiners finding it difficult to pay in currencies other than the dollar, as demanded by Russia after it was hit by international sanctions.
"These issues are now being resolved. Talks on smoothening the rupee trade mechanism are also happening. Consequently, volumes from Russia may go up even further," a senior executive from a major state-owned oil marketing company said. Russian banks have reportedly been wary of an excess of Indian rupee piling up with them as Russian imports from India remain significantly lower than Indian imports from the country.
As part of the latest Opec+ decision, Moscow has said it would extend an earlier voluntary production cut of 500,000 barrels per day (bpd), until the end of 2023.
Officials refused to comment on the sudden change in oil global prices, saying the government will adopt a wait-and-watch approach on the issue, at a time when the global geopolitical climate remains volatile. But people in the know said the possibility of a hike in pump prices in India haven't yet been discussed by the government.
Brent crude prices rose to $84 a barrel on Monday after the Opec+ group of nations announced a sudden production cut over the weekend. It hovered around $85.5 around midday on Tuesday, at the time of writing this report. For India, every $1 per barrel rise in crude oil prices will impact its current account deficit by about $1 billion.
Other sellers
Industry executives also stressed Moscow would continue to provide the discounts as a bulwark to West Asian nations increasingly becoming aggressive in providing discounts on their own.
Last year, Iraq had undercut Russia from June, by supplying a range of crudes that on average cost $9 a barrel less than Russian oil. The extremely price-sensitive market, therefore, had shifted heavily back in favour of Iraq, the largest traditional source of crude oil for India.
This had continued till the G7 nations had imposed a $60 per barrel price cap on Russian crude on December 5, 2022. This was implemented concurrently with a separate ban on Russian seaborne crude shipments by EU nations. Pushed into a corner, Moscow had since then offered more competitive prices to retain a steady flow of crude to new buyers like India and China to make up for lost volumes which were earlier going to Europe.
The series of Basrah crude export grades frriginating in Iraq are attractive for upgraded Indian refineries. They are also of great value for production of items such as diesel. As part of a long planned overhaul of its crude grades, Iraq has over the past year increased the availability of Basrah Medium and Basrah Heavy — relatively cheaper than Basrah Light — that are suited for India’s upgraded plants.
