Akash Jha
Refiners in India would have to increase supply from other countries as discounts on Russian crude decrease, a top government official told reporters on Monday.
India’s dependence on Russian oil imports has grown since the West cut ties with Moscow over its invasion of Ukraine in February. Due to substantial price cuts relative to Brent, Indian refiners have been gorging on Russian oil.
A source from an Indian refinery noted that the availability of Russian oil on spot markets has decreased, while discounts on Russia’s flagship Urals grade have fallen to $3.50–$3.50 per barrel for August loading and September delivery.
This disparity is now $1–2 per barrel smaller than anticipated, down from $8–9 per barrel in July.
The official stated that declining discounts had led to Russian oil prices regularly exceeding the $60 per barrel cap imposed by Western nations.
As a result of Opec+’s decision to reduce output, discounts have been gradually shrinking.
The price cuts offered by Russia explain the switch to their oil. If the price goes up to more beyond $60 per barrel, how do you plan to pay for it? The government official, who asked not to be identified, said as much.
The issue is not a lack of interest on the part of businesses. Ability and motivation are key. If you are unable to make a payment, your ability to purchase will be revoked,” the official warned.
Due to western sanctions, Indian refiners are already having trouble paying for Russian deliveries.
The State Bank ofIndia refused to give payment to the Indian Oil Corp. due to western sanctions on the shipping agency, the official claimed, thus the company was forced to make a payment in Chinese yuan.
According to the official, Iraq is ready to increase oil exports to India and offer deeper discounts, and New Delhi is now in talks with Baghdad to increase India’s credit duration with Iraq from 60 to 90 days.
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After increasing their purchases of Russian oil last year, Indian refineries have pushed Iraq down to second place.
Instead of being caught up in a $1 discount per barrel from a company to which making payment is difficult, the official recommended instead taking advantage of a longer credit period from a regular supplier.
A second refinery source confirmed that their company will not purchase Russian oil at the higher price. We are aware that discounts are decreasing, but he did not specify what the discounts might be for September loading cargoes.
