Indian Oil Market Divided Over Russian Crude Oil Purchases: Some Cut Back, Others Increase

Government refineries have reduced their purchases of Russian oil in recent times. Government refineries are cutting back on Russian oil procurement due to increasing risks, US pressure, diminishing discounts, and the need to diversify supply.

The Indian oil market is divided when it comes to purchasing Russian oil. On one hand, state-owned refineries are distancing themselves from Russian crude oil due to American pressure and declining discounts. On the other hand, private refineries are increasing their purchases. In September, state-owned refineries reduced their procurement of Russian crude oil, signalling caution. Their imports averaged 6.05 lakh barrels per day, which is 32% less than the April-August average, 22% less than in August, and 45% less than in June. These figures were released by Kpler, a global real-time data and analytics provider.

Private Refineries Increase Russian Oil Procurement

In contrast, private refineries have increased their Russian oil purchases to 9.79 lakh barrels per day, which is 4% more than the April-August average, 8% more than in August, and approximately stable compared to June. In September, the share of Russian crude oil in the imports of state-owned companies was only one in every five barrels. For private refineries, however, it was two out of every three barrels.

Why State-Owned Refineries Reduced Purchases

According to industry officials, state-owned refineries are reducing their purchases of Russian oil due to increasing risks associated with Russian oil, American pressure, diminishing discounts, and the need to diversify supply. Officials stated that due to their significant responsibility in the domestic market, state-owned companies prioritise supply security over price. Private companies, on the other hand, with only a 10% share in the domestic retail market, balance domestic and export sales for profit.

Affordable Option

Reliance Industries is benefiting from a long-term deal with Rosneft, which offers greater discounts compared to spot market purchases. This deal mandates the purchase of a minimum quantity of Russian crude oil every month. Nayara Energy, a Rosneft-backed refinery, remains heavily reliant on Russian oil and is unable to secure crude from other sources. Russian oil is among the most economical options for Indian refineries, offering higher gross product margins and better discounts compared to alternatives.

Decline in Total Imports

Due to the reduced purchases by state-owned companies, total oil imports from Russia have fallen to 15.8 lakh barrels per day, a 6% decrease compared to August and a 13% decrease compared to the April-August average.