At least two Indian refiners are planning to buy Saudi oil below normal in May after the kingdom raised the official selling price (OSP) for Asia to a record high, two sources said on Wednesday, as India Increases purchases of cheap Russian crude.
India, the world’s third largest oil importer and consumer, has been hit hard by rising crude prices, with pump prices touching record highs in some states.
Kingdom oil producer Saudi Aramco, the world’s top oil exporter, has raised crude oil prices for all regions, reaching an all-time high in Asia.
The Middle East accounts for the bulk of India’s oil imports, with Iraq and Saudi Arabia being the top two suppliers to Asia’s third-largest economy.
Sources at the two Indian refiners declined to be named, citing confidentiality.
He did not disclose whether refiners would buy, and said the cuts in May would be marginal as they would have to raise the amount they made under annual contracts.
To cushion the rising cost of oil imports, India has turned to Russian barrels that are available at a deep discount to the dated Brent benchmark, citing “national interests”.
Some companies and countries have given up on Russian crude after the country launched an invasion of Ukraine on 24 February. Moscow refers to the conflict as a “special military operation”.
Indian refiners have bought at least 16 million barrels of cheaper Russian oil for May loading, the same as purchases for the whole of 2021, according to Reuters calculations.
The companies have purchased mostly Russian Ural, a grade similar in quality to medium sour crude produced in the Middle East and West Africa, mainly Angola.
Ehsan ul Haq, an analyst at Refinitiv, said rising purchases of Russian crude meant India would buy less from Middle Eastern suppliers, including spot purchases of grades such as Iraq’s Basra oil.
In turn, more Gulf crude, as well as some West African blends, could end up in Europe, said one of the Indian refiner sources.
“In addition to changes in trade flows, changes in buying patter could increase freight costs as will longer journeys,” Mr Haque said.
Although Russian imports were meeting only a small part of India’s overall needs, he said they are important for Russia as it loses market share in traditional European markets.