India only $ 4 per barrel discount on Russian crude, know the reason

Jackson Brown

Crude Oil: After the Ukraine war, the exemption or concession that India was getting on the purchase of crude oil from Russia has now reduced considerably. In the middle of last year, India was getting a discount of $ 30 per barrel on Russian crude, which has now come down to $ 4 per barrel. On the other hand, the units which have been arranged by Russia to transport this oil, are charging a much higher rate than normal from India.

Russia is charging Indian refiners less than the price cap of $60 a barrel imposed by the West. But he is charging $11 to $19 per barrel for the transportation of crude oil. This is twice the normal charge for delivery from the Baltic and Black Seas to the west coast.

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According to sources, the cost of transportation from Russian ports to India is sitting at $11-19 per barrel. This is comparatively higher than the transportation charges from the Persian Gulf to Rotterdam.

Russian oil was banned by European buyers and some countries in Asia like Japan after Russia’s invasion of Ukraine in February last year. Due to this, Russian Urals crude oil started trading at a much lower price than Brent crude oil i.e. the global benchmark price.

crude oil

Indian refinery companies convert crude oil into fuels like petrol and diesel. Currently these companies are the biggest buyers of Russian oil. India has left China behind in this matter. China’s crude oil imports from Russia have come down significantly due to a slowing economy and large-scale electrification of vehicles.

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To establish their ‘penetration’ on the cheap crude oil of Russia, Indian refinery companies have increased their purchases very fast. Before the Ukraine war, Russia’s share in India’s total crude oil purchase was only 2 per cent, which has increased to 44 per cent today. But now the discount or concession on Russian crude oil has come down significantly.

This is because public sector Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), Mangalore Refinery and Petrochemicals Limited and HPCL-Mittal Energy Limited along with private refinery companies such as Reliance Industries Ltd. and Nayara Energy Ltd. are in separate talks for crude oil deals with Russia.

At present, 20 lakh barrels of crude oil is coming from Russia every day. In this, the share of public sector units is about 60 percent.

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India used to buy 44,500 barrels of crude oil per day from Russia in the 12 months ending February 2022 before Russia’s attack on Ukraine. During the last few months, India’s purchase of Russian crude via sea has crossed that of China.

Indian refinery companies buy crude oil from Russia on the basis of its supply. Due to this, Russia has to arrange for the transportation and insurance of oil. Although crude oil is being received from Russia at a price of less than $60 per barrel, but overall this amount is sitting at $70 to $75 per barrel. (Language)

Nrapendra Gupta

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