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Indian Refiners May Quit Purchasing Saudi Oil In May And Instead Buy Russian Barrels

TNI || New Delhi || 08th April 2022

A couple of sources indicated on Wednesday that at least two Indian refiners plan to buy less Saudi oil in May than usual after the kingdom lifted the official selling price (OSP) to record levels for Asia, as India increases purchases of inexpensive Russian crude.

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Rising crude prices have hit India hard, the world’s third-largest oil importer and user, with pump prices in several areas reaching new highs.

Saudi Aramco, the world’s largest oil exporter, has boosted crude prices for all areas, with prices for Asia reaching new highs. India buys the majority of its oil from the Middle East, with Iraq and Saudi Arabia being the main two exporters to Asia’s third-biggest economy.

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The sources didn’t say how much refiners would buy, but they did confirm that the cuts in May would be minor as they have to meet their annual contract obligations.

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India has turned to Russian barrels, which are available at a big discount to the dated Brent benchmark, to cut down on rising oil import costs, saying that “national interests” are at play.

Following Russia’s invasion of Ukraine on February 24, some firms and governments have rejected Russian crude.

As per Reuters calculations, Indian refiners have purchased a minimum of 16 million barrels of cheaper Russian oil for May loading on a delivered basis, which is similar to orders for the entire year of 2021.

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The companies mostly bought Russian Urals, a grade of crude that is similar to medium-sour oil produced in the Middle East and West Africa, primarily Angola.

Rising imports of Russian crude, according to Refinitiv analyst Ehsan Ul Haq, means India will probably buy less from Middle Eastern sources, particularly spot purchases of grades like Iraq’s Basra oil.

As a result, more Gulf crude and some West African blends may wind up in Europe, according to one of Indian refiner sources.

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Apart from changing trade flows, changes in purchase habits are likely to increase freight costs because long-haul journeys will be required, Haq said.

Despite the fact that Russian imports only covered a small portion of India’s total demand, he claimed they were important for Russia as it has lost ground in traditional European countries.