India might get Russian oil well below the West’s $60 per barrel price cap as international prices have declined. Earlier this month, the G7 and EU decided to cap the price of Russian seaborne oil at $60 per barrel, a move that India didn’t support. Russia remained India’s top oil supplier for second month in a row in November.
80 per cent of India’s oil import from Russia included the flagship Urals crude which is currently trading at around $49 per barrel. ESPO blend and Sokol, on the other hand, are trading at around $62 and $69 per barrel, respectively. In view of this dip in international rates, Indian refiners could get the Russian oil well below the G7 price cap.
Multiple government officials and industry executives told Economic Times that domestic refineries will keep purchasing cheap Russian oil with no major shipping or insurance trouble expected as the market rate has come down to be below the cap.
Had India decided to purchase the Russian oil above the price cap, it would have faced more challenges as the US and its allies have prohibited western shipping and insurance companies from handling Russian oil sold above the price cap from December 5.
Russia is also unlikely to defy the market to increase prices, according to the industry executives, who added that even the west wouldn’t want Russian oil to go off the market as it would have a sharp impact on rates. “The price cap looks more like a posturing. Even the West may not want Russian oil to go off the market,” said MK Surana, the CEO of Ratnagiri Refinery and Petrochemicals and former chairman of HPCL.
“Very low cap might motivate Russia to consider reducing production rather than produce at uneconomical rates which would reduce overall global supplies and push up prices for all,” Surana noted.
However, if Russia reduces discount, India will not buy Russia oil as our aim is not to please Russia but to please its own people, R Ramachandran, former chief of refineries at BPCL, opined.
Russia, meanwhile, has said that it would not ship oil to countries that are supporting the $60 price cap adding that it could even mull over reducing production. The country welcomed India’s decision to not support the price cap and offered it cooperation on leasing and building large-capacity ships to overcome the ban on insurance services and tanker chartering in the EU and Britain to continue buying discounted oil.
