Indian crude basket likely to reflect imports from Russia

New Delhi: With Russia emerging as one of the top oil suppliers to India, the Indian crude basket price is likely to factor in the cheaper Russian imports going ahead.

The Indian basket of crude oil broadly represents the cost of India’s oil imports, and it has so far not accounted the oil imported from Russia at discounted prices. The Indian basket of crude oil represents a derived basket comprising of sour grade (Oman and Dubai average), sweet grade (Brent Dated) of crude oil processed in Indian refined in the ratio of 75.62 : 24.38.

As of April 27, the Indian crude oil basket stood at $78.45 per barrel, according to data from Petroleum Planning & Analysis Cell.

“At some point of time the Indian basket will catch up. Indian basket in any case is a dynamic basket. Market is changing, and obviously the basket will change. The new reality for Russian oil accounting for a significant part of our import will have to be reflected in the Indian basket,” said an official in the know of the developments.

Russia emerged as a major supplier to India for the first time in FY23 after it started giving oil at discounted rates amid the Ukraine war. Despite concerns raised by the west to India’s imports from Russia during the war, India has taken a strong stand and said that it looks at all options to achieve energy security.

Russia was the largest exporter of crude oil to India by value in February in spite of the western price cap of $60 per barrel, according to data from the union ministry of commerce and industry.

Crude imports from Russia in February stood at $3.35 billion, followed by Saudi Arabia at $2.30 billion and Iraq $2.03 billion.

Between April and February, Indian import of Russian oil jumped to $27 billion, second only to imports from Iraq which stood at $30 billion, making Moscow the second largest crude exporter to New Delhi in FY23.

India has significant import requirements for crude, as 80% of its oil needs come from imports, and a large part of this is now being met from Russia. Recently, finance minister Nirmala Sitharaman said India could purchase Russian oil even if the price reached near or crossed the cap.

A ICRA report, however, said that sea-borne exports from Russia witnessed a significant decline in the first week of April 2023 to around 2.89 million barrels per day (mbd) from around 5 mbd at the end of 2021 indicating the impact of the production cuts by Russia. “This is likely to keep the supplies tight in the market,” it said.

rituraj.baruah@livemint.com