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Little gains: India saved just $2 per barrel even after Russia’s deep discounts
An increase in India’s subsidized purchases of Russian crude following Moscow’s invasion of Ukraine a year ago is likely to save around $2.5 billion in the first three quarters of the current fiscal year, an analysis by IndiaTrade for the period shows. data shows. However, the savings, while substantial for India, are far less than many expected amid reports of huge discounts being offered by Russia.
According to the analysis, cheap Russian oil brought down the average landed price of imported crude oil for India, the world’s third-biggest consumer of crude, by about $2 a barrel during the nine-month period. The average landed price of imported crude oil for April-December was $99.2 per barrel. If Russian barrels are taken out of the math, the average price rises marginally to $101.2 per bbl.
The total value of India’s oil imports for the period under consideration stood at $126.51 billion. The analysis shows that if Indian refiners had paid for Russian oil the average price paid for crude from other suppliers, the oil import bill would have been around $129 billion, or about 2 per cent higher. The value of oil imports from Russia for this period was approximately $22 billion.
The average landed price of Russian crude oil for India in April-December was $90.9 a barrel, about $10.3 lower than the average non-Russian barrel price. This translates into an effective discount of 10.1% on the average landed price of crude oil imported from other countries. Though substantial, this discount is much less than what has been claimed in various reports from India and abroad. According to industry insiders, the difference may be due to the relatively higher cost of freight and insurance for Russian oil compared to other traditional suppliers.
With Moscow facing Western sanctions over the Ukraine war, freight and insurance costs for transporting Russian oil have reportedly skyrocketed. So, while the discount may be deeper on the price of the oil, the discount on the landed price – including freight and insurance costs – will be lower.Earlier in February, Reuters reported, quoting Goldman Sachs, that buyers in Asia may have paid more for Russian crude than quoted prices. “We argue that the flexibility in production so far may partly reflect that the effective price paid for Russian oil appears to be significantly higher than quoted price estimates,” Goldman Sachs said in a February 10 note cited by Reuters. Said. Indian refiners began buying subsidized Russian crude, upsetting many in the West, who wanted Russian oil to be sold by buyers to curb Moscow’s ability to finance the war in Ukraine through oil sales.
Leave out the oil. So far, India has ensured that as one of the top importers of crude oil, it will buy oil from wherever it can get a good deal. Recently, Petroleum Minister Hardeep Singh Puri had said that India will play the market card to ensure supply of oil at a reasonable price. India is the world’s third largest consumer of crude oil and depends on imports to meet more than 85 per cent of its requirement.
Trade data analysis shows that the effective discount on Russian crude during April-December varies significantly from month to month. The lowest discount was $0.6 a barrel in April and the highest was $15.1 a barrel in May, the average price of crude oil imported from the rest of the world in those months. In percentage terms, the discount ranged between 0.6 percent and nearly 14 percent.
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