The steep discounts India enjoyed on Russian crude oil through most of FY23 have plunged, two government officials aware of the development said, as China boosted purchases and oil producers cut production.
As Russia scrambled for buyers after its invasion of Ukraine sparked Western sanctions, India stepped up as a new major buyer, securing discounts of as much as $15-20 a barrel. This has since fallen below $10 and has touched even $5, the officials cited above said on the condition of anonymity.
“With Russian oil finding more buyers, the discounts to Indian refiners have been coming down. Earlier, we were getting discounts that varied from cargo to cargo,” said one of the two officials cited above, all of whom spoke on condition of anonymity.
Until now, Indian refiners used to get Russian oil at an average discount of $15-20 per barrel on a delivered-at-place (DAP) basis, where the seller bears the transportation risk for delivering at the designated port. This discount varies from cargo to cargo, and a sub-$10 per barrel discount seems to have become the new normal for India, the world’s third-largest oil importer.
China, the world’s second-largest oil buyer, recently turned one of the top buyers of Russian oil as it reopened its economy after the pandemic setback. According to Chinese government data, Russia overtook Saudi Arabia to become its top oil supplier during January and February 2023. Imports from Russia stood at 15.68 million tonnes in January-February, or 1.94 million barrels per day (mbpd), up 23.8% from 1.57 mbpd in the corresponding period of last year, showed the data from China’s General Administration of Customs released in March. Also, this comes in the backdrop of a $60 per barrel price cap imposed by a US-led global initiative along with G7 countries, the European Union and Australia that was to be revised in March.
