Discounted Russian crude imports saved Indian refiners $7 billion

The total value of India’s oil imports for the 14-month period from April 2022 to May 2023 was $186.45 billion. Had Indian refiners paid for Russian oil the average price they paid for crude from all other suppliers put together, the oil import bill would have been $193.62 billion, the analysis shows.

The value of oil imports from Russia for the period was nearly $40 billion. The average landed price of Russian crude for Indian refiners for the 14-month period was $79.75 per barrel, about $14.5 lower than the average landed price of non-Russian barrels. It translates into an effective discount of 15.3 per cent to the average price of oil imported from other supplying nations.

Although $7.17 billion may not appear to be a significantly high amount in the overall scheme of India’s foreign trade, the savings are substantial considering these were accrued by five Indian refining majors — Indian Oil Corporation, Reliance Industries, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Nayara Energy — and their arms.

The government releases commodity-wise and country-wise trade data with a lag, and so far, data up to May 2023 has been released. While the price of crude oil depends on grades and their prices can vary substantially, the average landed price of crude and import volumes from the supplying countries were used for computations as the government does not release grade-wise data.

Russian crude accounted for 24.2 per cent of India’s oil imports totalling 280.41 million tonnes, or 2.06 billion barrels, in the 14 months to May. During the period, Russia displaced traditional heavyweights like Iraq and Saudi Arabia to emerge as India’s largest supplier of crude. Iraq was the second-biggest supplier with a market share of 21 per cent by volume, followed by Saudi Arabia with a 16.4 per cent share.

Compared to the next five major suppliers of crude to India during the 14-month period, the landed price of Russian oil was at discounts ranging between 10 per cent – in the case of Iraq – and 22.1 per cent – in the case of the UAE. The UAE was the fourth-biggest supplier of crude to India during the period.

With regard to import of Saudi Arabian crude, Russian oil was at a discount of 19 per cent. In the fifth spot was the US, followed by Kuwait in sixth. Russian oil supplies to India were at a discount of 11.7 per cent to US crude, and 15.4 per cent to oil bought from Kuwait, the computations show.

The share of Russian crude in India’s oil import basket has been rising continuously for over a year and has been hitting fresh highs for the past few months. In May, Russian crude accounted for 40.4 per cent of India’s total oil import volumes, followed by Iraq with a market share of 18.3 per cent, and Saudi Arabia with a share of 12.2 per cent, the trade data showed.

The average landed price of Russian crude imported by Indian refiners in May was $70.17 per barrel, $8.11 per barrel or 10.4 per cent lower than the average landed price of oil imported from all other suppliers. The average landed price of Iraqi crude in May was $75.16 per barrel, while for Saudi Arabian oil, it was $84.17 per barrel.

The effective discounts, while significant from the point of view of Indian refiners, are not as high as what had been initially anticipated. Relatively higher cost of freight and insurance for Russian crude as compared to oil from other suppliers is seen as the most likely reason.

With Moscow facing Western sanctions over the Ukraine war, freight and insurance costs for ferrying Russian oil are said to have gone up considerably. This suggests that while the discounts might have been deeper on the actual price of oil, the discount on landed price, which includes freight and insurance costs, would work out to be much lower.