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Even as the price cap on Russian oil is set to come into effect next week, India will continue to import crude oil from all sources, including Russia, a senior government official said on Friday.

Noting that the oil trade has all options available for moving crude from one country to another, the official also said that global suppliers have assured India of uninterrupted oil supplies. “We will continue to buy from wherever we need to buy, including Russia. India has been assured by global oil suppliers that there will be no disruption in supplies," the official said.

Importers will also be looking at availing services of non-European shipping liners, insurance and finance providers to import Russian oil by circumventing the price cap. The official said that India will continue to receive cargoes from Russia booked so far beyond 5 December.

Queries sent to the ministry of petroleum and natural gas remained unanswered till press time.

European Union countries are scheduled to decide on the price cap proposal of G7 on Friday. The embargo o price cap ends on December 5.

Further, the Office of Foreign Assets Control of the US has also come up with its guidance for implementation of price cap policy. “The price cap for Russian oil will be set after a technical exercise conducted by the Price Cap Coalition. Shipping, freight, customs, and insurance costs are not included in the price cap and must be invoiced separately and at commercially reasonable rates," it said.

The executive order from the Department of Treasury in the US said: “Secretary of the Treasury, in consultation with the Secretary of State, hereby determines that the prohibitions in section l(a)(ii) shall apply to the following categories of services as they relate to the maritime transport of crude oil of Russian Federation origin: Trading/commodities brokering, financing, shipping, insurance, including reinsurance and protection and indemnity, flagging, and customs brokering."

The price cap gains significance for India as Russia has emerged as one of the top source of crude oil this year, despite traditionally not supplying a significant quanity of oil.

According to data from S&P Global Commodity Insights, India’s appetite for Russian crudes in October rose to levels unprecedented levels and surpassed volumes shipped by leading Middle Eastern suppliers.

“From a market share of less than 1% in India’s import basket before the start of the Russia-Ukraine conflict, Russia’s share of India’s imports rose to 4.24 million mt, or nearly 1 million b/d, in October, taking a 21% share comparable to that of Iraq and higher than Saudi Arabia’s share of around 15% in the country’s import basket in the same month," said a recent S&P Global report.

Shreyans Baid, senior oil analyst for South Asia at S&P Global Commodity Insights said that since the voyage time to India from Russian ports ranges from 2-5 weeks, the crude that arrived in October must have been purchased months in advance. He, however, noted that future purchases of Russian crudes by Indian refiners will depend on how the EU ban shapes up the seaborne trade and whether Russian crudes make economic sense given high freight rates and the market structure.

Further, amid the talks of EU sanction snd the price cap, the value of Russia’s crude exports has come under pressure. “The outright price for Russia’s flagship crude Urals slumped to 22-month lows in the run-up to the Dec. 5 start for the mechanism as weak physical market fundamentals and anxiety around sanctions risk have spurred even steeper discounts," another S&P Global report said.

The official also said that the proposed subsequent cap on imports of petroleum products from Russia will not impact India as India produces its petroleum products and is a net exporter.

Recently, the union minister for petroleum and natural gas said that India is not worried of the proposed price cap as there are several sources for import of the fossil fuel.

On Friday, global crude oil prices were ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies (Opec+) on Sunday and the European Union’s proposed price cap on Russian crude kicking in on Monday.

At the time of writing the story, the February Brent contract on the Intercontinental Exchange (ICE) traded at $86.72 per barrel, down 0.18% from its previous close. The January contract of West Texas Intermediate (WTI) fell 0.18% to $86.72 per barrel.

ABOUT THE AUTHOR

Rituraj Baruah

Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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