The entry of some small and lesser-known oil traders selling cheap Russian oil could soon benefit India.
These oil traders are offering more discounts and new ways for Indian buyers to purchase supplies rejected by the West after Russia’s invasion of Ukraine, according to a report by Bloomberg.
India is among the countries buying discounted Russian oil after sanctions by the west and the country’s share of oil imports have significantly gone up in the past few months.
Now the question is, how will this more discounted oil benefit India which relies heavily on imports for its needs?
Why India is looking to buy oil from lesser-known traders?
State-run refiners such as Indian Oil are considering deals as it’s easier than buying directly from Russia due to less bureaucracy.
The new traders were recently offering supplies of Russian Urals crude at discounts of about $8 a barrel, according to a Bloomberg report.
Although India has been under pressure from the US and EU to not do business with Russia, in view of sanctions by the West, the country has several times reiterated that its volume of Russian imports is minuscule as compared to Europe’s purchases.
The reason discounted Russian oil is important for India, which imports more than 85% of its needs, is because the country is looking for ways to cool down inflation and the surge in commodity prices.
The access to cheap crude is already boosting India’s petroleum imports, which grew almost 16% in April from last year. India's oil imports from Russia surged to a record of around 950,000 barrels per day (bpd) in June.
Russia continued to be the second largest oil supplier to India after Iraq, while Saudi Arabia remained in the third spot for the second month in a row.
Oil imports from Russia rose 15.5% in June from May, while those from Iraq and Saudi Arabia dropped by 10.5% and 13.5%, respectively.
Will discounted oil bring down petrol and diesel prices?
Cheaper oil helps the country in controlling inflation. With 80 per cent of India’s oil requirement is met through imports, it benefits India to get cheaper oil from Russia.
India in Mat announced a steep cut in excise duty on fuel which will cut petrol prices by Rs 9.5 per litre and diesel prices by Rs 7 per litre.
Now, cheaper Russian oil is reducing losses for state-run Indian refiners selling fuel at lower prices on the domestic market.
If India gets even cheaper oil from new oil traders, it may bring down petrol and diesel prices further.
India consumed 202.7 million tonnes of petroleum products in the 2022 financial year, up from 194.3 million tonnes in the previous year.
Are other countries considering the offer?
Sri Lanka received Russian crude onboard a vessel chartered by Coral Energy in May and has since bought more from the trader.