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Some Indian refiners set to cut Saudi oil in May and buy Russian barrels

At least two Indian refiners plan to buy less Saudi oil than usual in May after the kingdom raised the official selling price (OSP) to record highs for Asia, two sources said on Wednesday, as that India is increasing its 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 in some states hitting record highs.

State oil producer Saudi Aramco, the world’s largest oil exporter, raised crude prices for all regions, with those to Asia hitting all-time highs. The Middle East accounts for the bulk of India’s oil imports, with Iraq and Saudi Arabia being the two main suppliers to Asia’s third-largest economy. Sources for the two Indian refiners declined to be named, citing confidentiality.

They did not disclose the volumes refiners would buy and said the reductions in May would be marginal as they have to increase the amount they have committed to under annual contracts. To mitigate the rising cost of oil imports, India has turned to Russian barrels which are available at a huge discount to the dated benchmark Brent, citing “national interests”.

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Some companies and countries shunned Russian crude after the country began its invasion of Ukraine on February 24. Moscow describes the conflict as a “special military operation”.

Indian refiners bought at least 16 million barrels of cheaper Russian oil for May loading on a delivered basis, similar to purchases for the whole of 2021, according to Reuters calculations. The companies mainly bought Russian Urals, a quality similar to the medium-sour crude produced in the Middle East and West Africa, mainly in Angola.

Refinitiv analyst Ehsan Ul Haq said increased purchases of Russian crude meant India was likely to buy less from Middle Eastern suppliers, including spot purchases of qualities such as Iraqi oil from Basra. . In turn, more Gulf crude, as well as some blends from West Africa, could end up in Europe, one of the Indian refiner sources said.

“In addition to altering trade flows, changes in shopping habits will likely increase freight costs as there will be long-haul travel,” Haq said.

Although Russian imports meet only a small fraction of India’s overall needs, he said they are important for Russia as it loses market share in traditional European markets.


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