Rosneft, the largest oil producer in Russia, will ship seven crude cargoes to India's top refiner, Indian Oil Corporation, this month, traders with knowledge of the deals told Reuters on Friday. Since the beginning of the Russian war in Ukraine, India - a price-sensitive crude buyer that has criticized OPEC and OPEC+ for keeping oil prices "artificially high" - has increased its purchases of Russian crude. Before the war, Indian refiners rarely bought oil from Russia at such a scale because of high freight costs.
Now, according to Reuters' sources, Rosneft will load seven 100,000-ton cargoes of the Urals blend from Russia's Baltic Sea ports in the second half of May.
Urals, Russia's flagship crude blend, was typically sold in Europe before the war in Ukraine, due to the proximity to the Russian ports on the Baltic Sea and the Black Sea. After the invasion of Ukraine, however, Western refiners and traders have started to shun Russian crude and are expected to continue to do so for years as the EU is considering the details of implementing a full embargo on all Russian oil imports.
Related: Brent Hits $113 As Oil Heads For Second Weekly Gain
Major international traders have already said they would either cut or phase out purchases of Russia's crude in the coming weeks.
India, the world's third-largest oil importer, is reportedly negotiating steep discounts for the Russian oil it is prepared to buy, asking for below $70 per barrel price to compensate for logistics, financing, and sanctions troubles for buying crude that is now toxic for most of the West.
Cheap Russian barrels currently appear irresistible to Indian refiners, despite warnings from the United States that buying Putin's oil is not in New Delhi's best interest.
Increased purchases of Russian crude in India could make tracking Europe's embargo on Russia's oil more complicated.
Earlier this week, Shell's chief executive Ben van Beurden said there was no way to trace whether there is Russian crude oil or how much crude from Russia will go into the refined products market globally.
"So therefore, diesel coming out of an Indian refinery that was fed with Russian crude is considered to be Indian diesel," Shell's top executive added, highlighting the challenge the West faces in truly banning Russian oil from the market.
By Tsvetana Paraskova for Oilprice.com
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Comments
Russia’s lifting cost of a barrel of oil at $2.8 is the lowest in the world. The reason is that the Russian oil industry pays for maintenance, exploration and production work in rubles but is paid for its oil exports in dollars. Moreover, unlike all other OPEC+ members, Russia needs a Brent crude price of $40 a barrel or less to balance its budget. For these reasons, Russia could afford to give India and Western oil traders a discount.
By purchasing 700,000 tonnes of crude (equivalent to 5.13 million barrels) from Rosneft, India isn’t only ignoring Western sanctions but is also disregarding the United States’ warnings that buying Putin’s oil is not in New Delhi’s best interest.
Even if the EU goes ahead and ban Russian oil exports and products, Russian oil will still find its way to the EU in the form of India's diesel and gasoline exports to Europe.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London