Sources said Indian refiners are concerned the latest sanctions will create “challenges” in getting vessels for Russian oil and could drive up freight rates. That may narrow the discount for the oil, which is bought from traders and Russian companies on a delivered basis.
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In addition, Moscow may have to push even more volumes through traders to shield from further sanctions risk, adding to uncertainties, the industry sources said, declining to be named because of the sensitivity of the matter.
India rarely bought Russian oil before 2022 due to high freight costs, but refiners in the world’s third-largest oil importing nation are now big buyers, benefiting from lower prices, after Europe banned Russian oil imports.
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State refiners Indian Oil Corp, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) are in joint talks with Russian major Rosneft for an annual deal to secure a combined volume of up to 400,000 bpd of Russian oil, mainly Urals, for the financial year that starts on April 1, sources said.
Sources said final volumes under the planned term deals depend on payment terms and discounts offered by Russia.
Rosneft has offered a discount of US$3-US$3.50 per barrel to Dubai prices, two of the sources said, costlier than top refiner Indian Oil’s current deal with Rosneft, which ends on March 31, at a discount of US$8-US$9 to Dubai quotes on a cost and freight basis.
Refiners consider the proposed discount to be thin, given the uncertainties brought by sanctions, sources said.
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Indian state refiners are not seeking supplies of Sokol grade crude under the planned term deal due to payment issues, they added.
The three refiners and Rosneft did not respond to requests for comment.
An Indian government source said India would continue buying Russian oil only if it is sold below the price cap in a non-sanctioned vessels.
The country’s oil ministry did not respond to a request for comment.