India losing 'steep discounts' on Russian crude oil due to China: Report

The discount given by Russia to India for crude oil has decreased as China's demand for the product rockets. Quoting two Indian government officials in the know, Mint reports that the steep discounts the country enjoyed through most of FY23 have plunged due to Chinese demand and a cut at oil producers' end.

The Russian invasion of Ukraine, back in February 2022, sparked a slew of Western sanctions. Following this, as Moscow was left scrambling for buyers for its crude oil, India stepped up as a major buyer and managed to secure discounts of up to $15-20 a barrel. As per the Mint report, these discounts have now fallen below $10 and have even touched $5.

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“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," one official told Mint, on the condition of anonymity.

“We used to get around $15-20 per barrel discount on Russian oil cargoes depending on what used to be the price in the spot market. That discount has become less now," said the second official.

However, recently, China, which happens to be the world's second-largest oil buyer, has become one of the top buyers of Russian oil.

As per Chinese government data, while earlier Saudi Arabia was the country's top oil supplier, Russia has taken over the position during January and February 2023.

China's General Administration of Customs in March released data that showed the number of imports from Russia in January-February was 15.68 million tonnes, which is equivalent to 1.94 million barrels per day (mbpd), an increase of 23.8 per cent from 1.57 mbpd during the same period the year before.

This comes as a US-led global initiative along with G7 countries, the European Union and Australia imposed a $60 per barrel cap on Russian oil. Meanwhile, the Organization of the Petroleum Exporting Countries plus grouping (OPEC+) which includes Russia, has announced an additional 1.16 million barrels per day of supply cut. This takes effect next month.

During FY23, by providing discounts amidst the Ukraine conflict, Russia became a significant provider of oil to Indian refiners for the first time. As a result, in the 11 months leading up to February of the previous fiscal year, India imported crude oil worth $27 billion from its strategic partner, placing the Russian Federation in second place for Indian oil imports. Additionally, the discounted Russian oil aided India in satisfying the rising demand for petroleum products. India consumed 222.30 million tonnes of petroleum productsin FY23,10.2 per cent more than in the previous year.

(With inputs from agencies)

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