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Indian refiners are staring at an unexpected upside from US President Donald Trump’s high global tariffs, which are neutralising stringent sanctions enforced in January by the US on Russian oil exports , government and refining officials said.
Russia is India’s biggest supplier of oil.
Also, a large price cut by Saudi Arabia, India’s third largest oil supplier, for May loadings to Asia and a higher-than-expected increase in OPEC output, partly prompted by volatility in the oil market from Trump’s tariffs, stand to benefit Indian state-run refiners, refining officials said.
Indian Oil, Bharat Petroleum and Hindustan Petroleum, among others, had agreed to term contract extensions this year with Iraq, Saudi Arabia and UAE, which together supply 40 per cent of India's crude oil.
India is in a sweet spot, a top government official told Business Standard, as not only have oil prices crashed but Russian oil is down to $50 per barrel levels, leaving Washington’s sanctions on Russian oil toothless.
Russian export benchmark Urals is trading at a huge discount on free-on-board (FOB) basis to European benchmark Brent oil, pricing assessments show. Urals is quoted at a discount of $15 per barrel to Brent at $63 per barrel, which works out to $48/barrel, according to London-based oil pricing agency Argus. This allows use of western shipping companies and insurers, outside the ambit of any sanctions.
Western nations enforced a price cap of $60 per barrel on Russian crude oil exports on FOB basis in early 2023, which prevented use of western services for any Russian cargoes invoiced above the cap.
But the decline in rates of Russian Urals oil, Indias biggest import grade, below thr price cap will make purchases much easier, refiners said.
Even without availing western shipping services, Russian suppliers have access to over 100 tankers for shipping oil to India, which do not fall under Washington’s sanctions, ship tracking data showed.
But documentation is onerous in such cases compared to using western tankers.
A senior official from a state refiner said that banks were scrutinising shipments closely and demanding more documents after the January sanctions.
Saudi cuts
Saudi Aramco, India’s third biggest supplier of oil, cut premiums on official selling prices to Asian buyers by $2.30 per barrel for May loadings from April — the biggest cut since October 2022 for its two major grades, Arab Light and Arab Medium, UK information provider Energy Intelligence said. Saudi rates have an impact on prices quoted by Iraq and UAE. So, any changes in the Middle East, impacts nearly 45 per cent of India’s crude imports.
A Mumbai-based analyst said that lower oil prices allow for healthy marketing margins on petrol and diesel of over ₹12 per litre.This is five times the average in the pre-pandemic period, placing much less pressure on government finances as refiners can partly fund their losses on LPG for fiscal 2025-26 from gains at the pump.
Russian oil alone accounts for over 35 per cent of India’s crude imports of 5.3 million barrels per day (bpd), with discounts on delivered Russian crude turning a saviour for the Indian economy in the last three years, a top Indian refining official said.
April supplies of Russian crude in the first week of this month averaged around 1.6 million bpd, 280,000 bpd down from 1.88 million bpd in March, ship-tracking data from Kpler showed. (It is too early in the month for the figure to be definitive.)
India faced a lot of problems in February for supplies of Russian oil, with shipments at 1.46 million bpd crashing to the lowest since December 2023. This came after US sanctions on183 tankers, insurers, traders and producers of Russian oil briefly derailed Indo-Russian oil trade.
