India Will Continue Russian Crude Buying Despite Higher Prices

Indian buyers have no plans to reduce Russian crude imports, despite narrowing discounts to global benchmarks and levels above the G7 price cap according to several sources.

• “As long as there is any discount on Russian crude versus comparable grades on a landed basis, there will be demand for it in India,” said Vandana Hari, founder of Vanda Insights.
• “If Urals is being assessed only slightly above the $60/bbl cap, it may not be a deal-breaker for Indian refiners as long as the intermediaries can provide an undertaking to Indian banks, if needed, that the free-on-board price paid for the cargo was below the cap,” Hari added.
• Earlier this year, the gap between Russian crude and the Dubai benchmark stood at around $20/bbl on a delivered basis. Today, the discounts offered for Urals cargoes are around $8/bbl.
• Pricing data from Argus Media puts Urals crude delivered to the west coast of India at above $81 a barrel on Aug. 4, compared with about $68 a month earlier.
• Officials at four major refiners in India said they would continue purchasing Russian Urals, as similar-quality barrels from the Middle East remain at a significant premium.
• “There was a perception that India had limited capacity to refine medium sour grade of Russian crude, which would create a natural ceiling on Russian imports,” said Samiran Chakraborty, chief economist for India at Citigroup. “It has now been clearly demonstrated that such a bottleneck does not exist. This would imply that Indian refiners can continue with their Russian oil imports as long as discounts outweigh the higher logistics cost of imports.”
• Increases scrutiny as Urals rose above the $60/bbl price cap have not put off Indian processors and it won’t, as long as they can book vessels and settle payments, a refinery officials said.