India’s Oil Marketing Companies scrambling to buy discounted Russian crude

Close on the heels of Indian Oil Corporation (IOC) buying Russian crude, Hindustan Petroleum Corporation Ltd (HPCL) has also bought two million barrels of Russian crude oil as Indian refiners stepped up efforts to secure Russian oil available at deep discounts. Just like IOC, HPCL also bought Russian Urals crude through European trader Vitol. Separately, Mangalore Refinery and Petrochemicals Ltd (MRPL) has floated a tender seeking one million barrels of similar crude oil.

Western sanctions on Russia over its invasion of Ukraine has prompted many companies and countries to shun its oil. This has led to Russian crude being available in the market at deep discounts. To capture the opportunity, Indian refiners are floating tenders to buy such discounted oil. The tenders are mostly won by traders, who would have stocked inventories of the cheap Russian oil.

IOC, the nation’s top oil firm, late last week bought three million barrels of Urals through Vitol for May delivery at a discount of $ 20-25 a barrel to dated Brent. HPCL this week made the rare purchase of two million barrels of Urals crude for loading in May.

Meanwhile, Reliance Industries Ltd, operator of the world’s biggest refining complex, may avoid buying Russian fuel as it has a huge exposure in the US and the sanctions against Moscow may impact its business.

Trade with Russia is being settled through in dollars as the international payment mechanism has so far been kept out of the western sanctions ambit.  India has tied up supplies from Russia to the US in a bid to diversify its oil import basket, cutting reliance on the Middle East to meet its oil needs. With imports making up for 85 per cent of its oil needs, the recent spike in international oil prices have hurt it badly and it is now looking to cut spiralling energy bill through purchases from anywhere it can get at cheaper rates.

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