Russian oil discounts for India set to rise

People in the know of the developments said that currently the discounts are in the range of $4-6 per barrel and may reach $10-12 per barrel soon.

“A dip in global demand has forced exporting countries to sweeten their offers and with a fall in oil prices Russia also would try to cater more to India, which has been a major procurer of its supplies in the past two years," said an industry stakeholder requesting anonymity.

Further, a recent dip in import from Russia is expected to boost discounts on supplies from the country. Data from Platts (part of S&P Global Commodity Insights) showed that Russian crude exports to India hit the lowest level of 2023 in November at 1.3 million barrels.

Pulkit Agarwal, head of India content, S&P Global Commodity Insights said the price of delivered Russian Urals crude at Indian ports as assessed by Platts remains at a discount level of below $5/barrel to Dated Brent.

Prashant Vashisht, senior vice president and co-group head—corporate Ratings, ICRA said: “The discount on Russian crude currently is around $5-6 per barrel. In September, India saved around $429 million in total with purchase of 5.8 million tonnes of Russian crude."

Russia has emerged as the largest supplier of oil to India since its invasion of Ukraine in February 2022 amid western sanctions on Russia. Data from the commerce ministry showed that supplies from Russia comprised 33.4% of the total oil imports by India in September. In November, the share declined to 30.9%, showed the Platts data.

The global slowdown has also made other major suppliers like West Asian countries sweeten their offers.

Reuters recently reported that Saudi Arabia has cut the price of the Arab light crude to be supplied to Asian countries in January for the first time in seven months, with a 50 cent a barrel reduction to $3.50. Iraq also has been offering competitive discounts to India in the past one year.

Debashish Mishra, chief growth officer, Deloitte South Asia, said: “Oil prices have moderated of late primarily due to global demand slowdown, lesser than anticipated fall in temperatures during the winters in northern hemisphere, US not replenishing its strategic reserve at the rate that market was expecting and a lack of unwillingness among several Opec+ members for a further supply cut has resulted in this negative bias in oil prices." He added that low demand may further push suppliers to offer better discounts.

A recent S&P Global Commodities Insights report noted that after years of turbulence, global markets are still striving to find sustainable balance between energy supply and demand. 

Queries mailed to the petroleum and natural gas ministry, Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd remained unanswered till press time.

A decelerating macroeconomic framework is adding headwinds to already slowing energy demand growth, while geopolitical events in several regions either reduce energy supply or raise the risks of supply disruptions, it added.

Further, industry insiders say that discounts may be impacted by freight rates, which are currently elevated around $25,000-40,000 per container per day. A shipping industry executive said that the with the US keeping a watch over countries importing from Russia and also over the Russian fleet.

“A large number of ships are out of the global market with Russian ships only supplying Russian products including crude which has kept freight rates higher and the rates are likely to rise further going ahead," the executive said.

With high global freight rates, crude from West Asia may be attractive from India buyers compared to that from Russia, added one of the two people mentioned above.