Russia provides a steep discount of $35 barrel to India on oil prices
Russia is offering India hefty discounts on direct oil sales as rising international pressure reduces demand for its barrels elsewhere.
Russia is offering India huge discounts on direct oil sales as rising international pressure reduces demand for its barrels elsewhere following the invasion of Ukraine, the people familiar with the situation said. The sanctions-hit country is offering India discounts up to $35 per barrel on its flagship Urals grade to entice it to lift more shipments, according to the people, who asked not to be identified while talking about private discussions.
Russia wants India to take 15 million barrels of oil contracted for this year as a start and that conversations are taking place at the government level. Asia’s second-largest oil importer is among the handful of nations that have increased its reliance on Russian crude despite international pressure and sanctions. On Thursday morning, oil futures plummeted more than $5 a barrel on reports that the Biden administration is considering releasing 1 million barrels of oil per day from strategic reserves for several months to cool surging petroleum prices. Brent futures were down $4.71, or 4.2 percent, to $108.58 a barrel, while WTI futures in the United States were down $5.45, or 5%, to $102.74 a barrel.
The news comes as oil stocks in the United States fell by 3.4 million barrels in the week ending March 25, above expectations of a 1 million barrel drop, while implied demand for gasoline and distillates fell. The direct purchase is expected to include Russia’s Rosneft PJSC and India’s largest processor Indian Oil Corp., which have an optional term contract for close to 15 million barrels per year that is rarely used. It’s unclear the high end of the buying range, but India’s desire for the grades on offer is likely to be limited.
The deal stipulates that India will purchase oil only when it is cost-effective, according to the sources, adding that a discount granted by Russia might make the oil transaction possible even at increased freight rates. Indian Oil representatives did not immediately return calls for comment, and the Indian Oil Ministry declined to comment.
The two parties are looking into exporting the oil through Russia’s Vladivostok Port in the far east to bypass the Baltic Sea in the country’s west. Oil supplies might reach India’s east coast refineries in less than 20 days from there, according to the experts. To close the economic deficit produced by oil and armaments purchases, India pushes for increased exports of medicines, engineering equipment, and chemicals to Russia.
Since the start of the war, Urals crude has been selling at a discount. In a pricing window organized by S&P Global Platts last week, Litasco, the trading arm of Russia’s Lukoil PJSC, offered a cargo of Urals at a discount of $31.35 to the Dated Brent benchmark. There were no bids, and the price was lower than a record-low offer made by Glencore Plc just over a week ago. China purchases a different grade of Russian oil.
While the United States and its allies have attempted to isolate and punish Russia for its invasion of its neighbor, India has taken a milder posture. Despite international pressure, India has not issued a strong condemnation of Moscow’s action.
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