In order to increase the market share amid competition, Russia is now offering oil to India cheaper than Saudi Arabia. During April-June, Russian crude was cheaper than Saudi Arabia with the discount widening to almost $19 per barrel in May. Russia surpassed the kingdom as the second-biggest supplier to India in June, ranked just behind Iraq, according to a report by Bloomberg.
India is dependent on imports to meet 85 per cent of its oil needs. After Russia’s invasion in Ukraine, the Russian oil prices fell as most countries shunned it. During the period, India and China have become willing consumers.
According to official data, India’s crude import bill increased to $47.5 billion in the second quarter after a surge in global prices coincided with rebounding fuel demand. That compares with $25.1 billion in the same period last year, when prices and volumes were lower. Oil has tumbled recently on concerns over an economic slowdown, offering some respite to consumers.
“Indian refiners are going to try and get their hands on the cheapest crude possible that works with their refinery and product configurations… Russian crude fits that bill for now. The Saudis and Iraqis are not entirely losing out because they are directing more supply to Europe,” said Vandana Hari, founder of Vanda Insights in Singapore, according to the Bloomberg report.
While the discount of Russian oil to Saudi crude narrowed in June, barrels were still around $13 cheaper, averaging about $102.
India increased Russian oil imports by 4.7 times in April-May, or by more than 400,000 barrels per day (bpd), year-on-year, thanks to a price discount, the Russian central bank said on Tuesday.
Indian refiners have been snapping up relatively cheap Russian oil, shunned by Western companies and countries since sanctions were imposed against Moscow for what it calls a “special military operation” in Ukraine.
The central bank also said that China increased Russian oil purchases by 55 per cent in May as Russia surpassed Saudi Arabia as the top oil seller to China.
India and China have bought oil, gas and coal worth $24 billion from Russia in only three months after its invasion of Ukraine. Out of this, India spent $5.1 billion on Russian oil, gas and coal, more than five times the value of a year ago.
China spent $18.9 billion in the three months to the end of May, almost double the amount a year earlier. The $24 billion is an extra $13 billion in revenue for Russia from both countries compared to the same months in 2021.
Russia has been offering big discounts on its energy exports, which prompted India to buy more from the country. Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to data from Kpler.