NEW DELHI:
At least two Indian refineries are planning to buy less Saudi oil than usual in May after the kingdom raised its official selling price (OSP) to record highs for Asia, two sources said on Wednesday, as India ramps up purchases of cheap Russian crude. .
India, the world’s third largest oil importer and consumer, has been hit hard by rising oil prices, with pump prices hitting record highs in some states.
State oil producer Saudi Aramco, the world’s largest oil exporter, has raised crude oil prices for all regions, with those to Asia reaching new all-time highs.
The Middle East is responsible for the bulk of India’s oil imports, with Iraq and Saudi Arabia being the two largest suppliers of Asia’s third-largest economy.
The sources at the two Indian refineries will not be named due to confidentiality.
They did not disclose the volumes that refineries would buy, saying the cuts would be marginal in May as they have to cancel the amount they have committed to under annual contracts.
To mitigate the rising cost of oil imports, India has turned to Russian barrels available at a deep discount to the outdated Brent benchmark, citing “national interests”.
Some companies and countries have shunned Russian crude oil after the country began its invasion of Ukraine on Feb. 24. Moscow calls the conflict a “special military operation”.
Indian refiners, according to Reuters calculations, have bought at least 16 million barrels of cheaper Russian oil for May shipments on a delivery basis, comparable to purchases for all of 2021.
The companies have mainly purchased Russian Urals, a grade comparable in quality to medium acid crude produced in the Middle East and West Africa, primarily Angola.
Ehsan Ul Haq, a Refinitiv analyst, said rising purchases of Russian crude meant India was likely to buy less from Middle Eastern suppliers, including spot purchases of varieties such as Basra oil from Iraq.
In turn, more Gulf crude and some West African blends could end up in Europe, one of the Indian refinery sources said.
“Aside from changing trade flows, shifts in buying patterns are likely to increase freight costs because there will be long hauls,” Haq said.
While Russian imports only met a small portion of India’s total needs, he said they were important to Russia as it loses market share in traditional European markets.