India Diversifying Sources, Not Dependent On Russian Crude: Petroleum Minister

The issue with Russian crude is not about payments but about the price at which oil marketing companies would buy it, Union Minister Hardeep Singh Puri said on Wednesday.

"India has started to diversify its crude oil sources and is not dependent on Russian crude," the Minister for Petroleum and Natural Gas said at a press conference in New Delhi.

India will not buy oil from Russia if there is no discount, according to Puri. "There are other sellers."

The country did enjoy discounts of up to $20 per barrel of crude from Russia in February 2022, but the latest data hints at a fading price advantage.

Discounted crude imports allowed the OMCs to have supernormal profit and also saved India $2.7 billion in the first nine months of financial year 2024, according to Reuters calculations based on government data.

In October, Russia's discount significantly narrowed, with its offer price of $84.2 per barrel barely undercutting the average Brent price of $88.4 during the month. The price offered in October also marked a 14% uptick from the January price of $73.3 per barrel of oil, when average brent prices stood at $83.99 per barrel.

Russia's crude price last January was at a discount of $5.62 and $12.5 per barrel compared to the prices offered by Iraq and Saudi Arabia, respectively. The price in October offered a $1.55 and $14.57 discount to the other Middle Eastern suppliers.

While the Russian crude price still remains cheaper than that offered by Saudi Arabia, it marginally differs from Iraq's offer price.

India sources its largest portion of crude from five countries: Russia, Iraq, Saudi Arabia, the UAE and Nigeria. Despite the narrowing discount, Russia's grip on India's oil import pie remains formidable.

In February 2022, the country's total crude imports from Russia were 0.2% of its total import bill. It increased to around 40% later and stands at 33% currently, according to Puri. "Even if it goes down to 28–29%, it still is much higher than others."

From October 2022 to October 2023, Russia's share of India's crude import bill jumped from 21% to 33%. Iraq's share increased from 22% to 25%. The share from Iraq, Saudi Arabia and the UAE accounted for 45% of India's crude import bill.

According to Bloomberg, Indian refiners are seeking to boost supplies from the Middle East amid the Red Sea crisis, a fact that Puri also supported on Wednesday.

"We are in a very turbulent situation with two conflicts and challenges to shipping," Puri said. "We are navigating this very carefully, diversifying the sources of supply. Our primary responsibility is to ensure the availability of crude."

Puri clarified that there had been no discussions with the OMCs regarding cuts in fuel prices. "What happens in the future will be decided by the OMCs."

The OMCs' gross auto-fuel marketing margin has risen to Rs 7.4 per litre on the year-to-date basis in the third quarter of the current financial year compared to a historical margin of Rs 3.5 per litre, according to a JM Financial report on Dec. 18. The gross auto-fuel integrated margin rose to Rs 17.3 per litre compared to a historical margin of Rs 11.4 per litre.

Bloomberg reports indicated that shipping companies were urging Indian firms to absorb the risk premiums associated with deliveries through the regular route. But the refiners are hesitant to take on the additional liability, fearing potential pressure on their margins due to a significant increase in insurance and freight costs.