NEW DELHI: Indian imports of Russian crude are likely to decline on narrowing discounts and payment problems, forcing refiners to boost supplies from other sources, a senior government official told reporters on Monday.
Russia has emerged as the biggest oil supplier to India after Western nations shunned purchases from Moscow over its invasion of Ukraine in February last year. Indian refiners have been gorging on Russian oil on the basis of deep discounts to benchmark Brent prices.
But discounts on Russia’s flagship Urals grade have tumbled to $3-$3.5 a barrel for August loading and September delivery, while the availability of Russian oil in spot markets has declined, a source at one Indian refiner said.
That discount is down from $8-9 per barrel in July and is $1-2 per barrel narrower than previous estimates.
Due to falling discounts, Russian oil is often priced above the $60 per barrel ceiling imposed by Western nations, the official said.
Discounts have been narrowing due to Opec+’s decision to cut output.
The “shift to Russian oil had happened because of discounts. How would you make payment if the price is above the $60/barrel ceiling?” said the government official, who declined to be named due to the sensitivity of the matter.
“The problem is not the companies are not willing to buy. It is about ability and willingness. Your ability to buy ends if you cannot make payment,” the official said.
Indian refiners are already facing problems in making payments for Russian cargoes due to western sanctions.
The Indian Oil Corp recently had to make a payment in Chinese yuan because of shipping problems as the State Bank of India refused to furnish payment due to western sanctions on the shipping agency, the official said.
The official said Iraq is willing to supply more oil to India at better discounts and India is also talking to Iraq to extend the credit period to 90 days from 60 days.
Iraq has been pushed to second position since Indian refiners boosted imports of Russian oil last year.
“A longer credit period from a traditional supplier makes more sense than getting embroiled into $1 discount per barrel from a company to which making payment is difficult”, the official added.
A separate refining source said his company will not buy Russian oil if it is priced above the $60/barrel cap. “We know the discounts are receding, we don’t know what could be discount for September loading cargoes,” he said.
Russia has emerged as the biggest oil supplier to India after Western nations shunned purchases from Moscow over its invasion of Ukraine in February last year. Indian refiners have been gorging on Russian oil on the basis of deep discounts to benchmark Brent prices.
But discounts on Russia’s flagship Urals grade have tumbled to $3-$3.5 a barrel for August loading and September delivery, while the availability of Russian oil in spot markets has declined, a source at one Indian refiner said.
That discount is down from $8-9 per barrel in July and is $1-2 per barrel narrower than previous estimates.
Due to falling discounts, Russian oil is often priced above the $60 per barrel ceiling imposed by Western nations, the official said.
Discounts have been narrowing due to Opec+’s decision to cut output.
The “shift to Russian oil had happened because of discounts. How would you make payment if the price is above the $60/barrel ceiling?” said the government official, who declined to be named due to the sensitivity of the matter.
“The problem is not the companies are not willing to buy. It is about ability and willingness. Your ability to buy ends if you cannot make payment,” the official said.
Indian refiners are already facing problems in making payments for Russian cargoes due to western sanctions.
The Indian Oil Corp recently had to make a payment in Chinese yuan because of shipping problems as the State Bank of India refused to furnish payment due to western sanctions on the shipping agency, the official said.
The official said Iraq is willing to supply more oil to India at better discounts and India is also talking to Iraq to extend the credit period to 90 days from 60 days.
Iraq has been pushed to second position since Indian refiners boosted imports of Russian oil last year.
“A longer credit period from a traditional supplier makes more sense than getting embroiled into $1 discount per barrel from a company to which making payment is difficult”, the official added.
A separate refining source said his company will not buy Russian oil if it is priced above the $60/barrel cap. “We know the discounts are receding, we don’t know what could be discount for September loading cargoes,” he said.