Little gains: India saved just $2 per barrel even after Russia’s ‘deep discounts’

As per the analysis, cheaper Russian oil lowered the average landed price of imported crude for India — the world’s third-largest consumer of crude oil — by just about $2 per barrel during the nine-month period. The average landed price of imported crude for April-December was $99.2 per barrel. If Russian barrels are excluded from the math, the average price rises marginally to $101.2 per bbl.

The total value of India’s oil imports for the period under consideration was $126.51 billion. The analysis suggests that had Indian refiners paid for Russian oil the average price they paid for crude from other suppliers, the oil import bill would have been almost $129 billion, or around 2 per cent higher. The value of oil imports from Russia for the period was almost $22 billion.

The average landed price of Russian crude for India for April-December was $90.9 per barrel, about $10.3 lower than the average price of non-Russian barrels. It translates into an effective discount of 10.1% to the average landed price of crude imported from other countries. Though substantial, this discount is significantly lower than what had been claimed in various reports from India and abroad. According to industry insiders, the difference could be on account of relatively higher cost of freight and insurance for Russian oil, as compared to other traditional suppliers. With Moscow facing Western sanctions over the Ukraine war, freight and insurance costs for ferrying Russian oil have reportedly gone up considerably. Therefore, while the discounts might have been deeper on the price of oil, the discount on landed price–including freight and insurance costs–would work out to be lower.

Earlier in February, quoting Goldman Sachs, Reuters had reported that buyers in Asia might have paid more for Russian crude than what quoted prices suggest. “We argue that the resilience in production so far may partly reflect that the effective price paid for Russian oil appears significantly greater than the quoted price assessments,” Goldman Sachs said in a February 10 note quoted by Reuters. Indian refiners started snapping up discounted Russian crude, irking much of the West, which wanted Russian oil to be shunned by buyers to curb Moscow’s ability to finance the war in Ukraine through oil sales. So far, India has maintained that as one of the top importers of crude, it will buy oil from anywhere it can strike a good bargain. Recently, Petroleum Minister Hardeep Singh Puri had said that India will play the market card to secure oil supplies at reasonable prices. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. The trade data analysis shows that the effective discount on Russian crude varied significantly from one month to another over the course of April-December. The discount was the lowest in April at $0.6 per barrel and the highest in May at $15.1 per barrel to the average price of crude imported from the rest of the world in those months. In percentage terms, the discount varied between 0.6 per cent and almost 14 per cent.

Russian crude accounted for close to 19 per cent of India’s oil imports in April-December totalling 173.93 million tonnes, or 1.27 billion barrels. From being a marginal supplier of oil to India, Russia displaced heavyweights like Saudi Arabia and United Arab Emirates to become India’s second-largest supplier in April-December behind Iraq. In fact, Russia was India’s oil top supplier in September-December.

The government releases commodity-wise and country-wise trade data with a lag. The latest available data covers the first nine months of the current financial year and data up to January is only expected in March.

It must be noted that the price of crude oil depends on the grade of oil and their prices can vary substantially. As grade-wise import data was not available, the average landed price of crude and import volumes from each supplying country in April-December were used for computations.