India May Prefer Middle East Crude as Russian Oil Becomes Costly

India is in talks with traditional Middle East crude exporters for boosting purchases as Russian imports lose their pricing edge, according to a government official.

(Bloomberg) — India is in talks with traditional Middle East crude exporters for boosting purchases as Russian imports lose their pricing edge, according to a government official.

The discount on Russian crude has drastically reduced, making Urals, the country’s main export grade, less attractive, and that makes it prudent to buy from trusted suppliers, said the official, who didn’t wish to be identified citing rules.

India and China have been the two dominant buyers of Russian crude since the invasion of Ukraine more than a year ago after the war prompted other countries to shun the OPEC+ producer. The South Asian nation’s oil imports from Russia may also drop as an increase in oil prices could make payments above a price cap challenging for refiners, the official said.

Western nations have permitted countries to import crude from Russia, using European ships and insurance, provided the commodity is bought under a $60-a-barrel price cap.

India has been paying Russia mostly in dollars but now also in dirhams and yuan in order to keep trade flowing. Indian Oil Corp. was the first state-run refiner to pay Russia in yuan. The official said that Indian refiners buy most crude from Russia from the spot market from traders where the seller has to arrange for ships and insurance.

However, Indian Oil is the only refiner that has a term deal with state-run Rosneft to make long term purchases. Europe raised concerns over a Rosneft crude-carrying ship due to which State Bank of India refused to process the payment even though the crude was below the price cap. This forced Indian Oil to arrange for alternative payment in yuan via another bank, the official said. Such issues have impacted decision of other state firms from entering into long-term deals with Russia for crude imports.

–With assistance from Pratik Parija.

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