There has been a “significant increase” in Russian oil exports to India since March after Russia’s invasion of Ukraine – and New Delhi looks set to buy more cheap oil in Moscow, industry observers say.
China, already one of Russia’s largest oil buyers, is expected to buy more oil from Russia at deeper discounts.
This could mean future high green prices.
Major oil imports such as India and China are facing a sharp rise in oil prices, which has risen sharply since last year. Although oil prices have fluctuated in recent weeks, changing between gains and losses, they are still rising by 80% compared to last year.
“We believe that China, and to a lesser extent, India will go up to buy significantly reduced Russian food waste,” said Matt Smith, a leading oil analyst at Kpler.
This could be a significant difference in the negotiations between major world powers and Russian oil companies. As a result of Russia’s illegal and unprofessional war in Ukraine, the US has hit a powerful country with a power struggle, while the U.K. plans to do so by the end of the year. The European Union is also considering whether to do the same.
But sanctions will leave a gaping hole in the market as Russia finds itself too stubborn to sell it, analysts say.
The motives of the Indian Government are economic, not political. India will always look into the agreement on their oil import strategy.
“Urals crude from Russia are offered with recorded discounts, but acquisitions are limited so far, as most Asians adhere to traditional suppliers of the Middle East, Latin America and Africa,” the International Energy Agency said on March 17. Urals crude is a major oil importer exported by Russia.
“As of mid-March, we are seeing the possibility of 3 million barrels per day of Russian oil shipping being closed from April, but that could increase if borders or public dumping goes up,” the IEA said.
A few asset companies – such as Glencore and Vitol – were offering $ 30 and $ 25 discounts per bin respectively two weeks ago with the Urals merger, Ellen Wald, president of Transversal Consulting, told CNBC.
‘An important uptick’ of Russian oil overlooking India
Russian dirty goods going to India were “rare,” with 12 million barrels shipped in 2021, Smith told CNBC.
Kpler said he had not seen the import of India from Russia since December.
The Kremlin invaded Ukraine in Feb. 24, and since then, markets have been shaken by fears of a strong oil supply as Russia supplies the largest amount of oil and gas in the world.
“Russian oil is still gaining ground. Indian researchers have issued a number of Urals crude tenders as the Brent discount continues to rise, ”ANZ Research said on Friday.
Russia exports about 5 million barrels of crude oil per day, according to the IEA. It is the third largest oil producer in the world after the U.S. and Saudi Arabia.
Russia is also the world’s largest exporter of oil to the world and is the second largest exporter of crude oil outside Saudi Arabia, according to the IEA.
Intimate relations of U.S.-India
India could start buying cheaper oil in Russia at a discount of about 20%, according to analysts and other media reports. Based on raw prices, that could cost up to $ 20 per barrel.
India imports raw materials only from Russia at a rate of between 2% and 5% per annum, said Samir N. Kapadia, head of trade at state-owned communications company Vogel Group. Traditionally, New Delhi finds pollution in Iraq, Saudi Arabia, Arabia, the United Arab Emirates and Nigeria – but they all charge high prices right now, he said.
“Today, the motives of the Indian Government are economic, not political. India will always look into the agreement on their oil import strategy. It is difficult not to take a 20% discount on pollution when you import 80-85% of your oil, especially on the heels of epidemics and declining global growth,
In addition to the discounted benefits, India will also limit its alliance with Russia by removing the negative from them.
“India is the third largest exporter of oil in the world and currently, they are evaluating their options to work with an old friend,” Kapadia said. India – and China – have so far not been voted by the United Nations to condemn Russia’s invasion of Ukraine.
Both countries have a long history. Russia has backed India in various areas including the provision of military and defense-related equipment – about 60% of the needs of the Asian country, according to Kapadia. In the late 1950’s, India also relied on Russia for currency exchange programs to support its foreign exchange when the first one “broke down,” says Kapadia.
Russia also backed India on important issues such as the conflict with China and Pakistan surrounding the Kashmir region.
“White House pressure to curb crude oil purchases in Russia has fallen on deaf ears in Delhi,” Kapadia said. “The real question will be how the US and Europe react to India if they expand the olive branch in Russia by giving them a place to extract their oil.”
India, on the other hand, has taken the tone of contempt. “Countries independent of oil or those from Russia cannot afford cross-border trade,” a government official said two weeks ago, according to Reuters.
“If the West could focus on India’s focus on how Russia’s support could strengthen China’s influence in the region, things could change,” added Kapadia.
It is not surprising that China buys more Russian oil
Analysts expect that China, the world’s largest oil producer, will also receive reduced oil from Russia.
The Asian giant is already one of Russia’s largest oil buyers, and bought an average of 1.6 million barrels a day for Russian pollution in 2021, according to the IEA.
“China is still importing Russian oil, but would likely increase its purchases if it can pay in yuan and at discounts. Basically, Russia is pressured because it is having some difficulty selling its oil,”
If they can afford to buy Russian oil at a discount … then I don’t really see what could stop China from buying more Russian oil.
“China would really like very cheap oil … very high prices even at $ 90 at the highest level in China,” he added. “If they can buy Russian oil at a discount, and some of these discounts are very significant – $ 30 on the benchmark, then I don’t see what can stop China from buying more Russian oil.”
Many countries imposing sanctions on Iran’s oil, began with a US-EU ban in 2011, due to its nuclear program, but that did not stop China from buying oil from Iran “in all sorts of secretive ways,” he added.
So I do not think they are worried about insurance and other issues, ”said Wald, referring to the insurance agents who ride their money when they are sent to the region after the start of the Russia-Ukraine war, amid growing risks of shipping and ports. .
He said rising Chinese purchases could hit oil prices.
“I would not be surprised if we see Russian oil switch to China and then other suppliers like Kuwait, UAE, and even Saudi oil change, but the fact that China will be able to get a good discount, I think it will affect global prices,” he said.
China’s imports of Russian crude have risen sharply this year, but analysts have not attributed the war.
“China’s flow to Russia is slightly stronger than last year’s pace, but this has a lot to do with China’s longing for ESPO’s contaminated food from the ports of East Russia – not in line with Russia’s withdrawal from Europe,” Kpler’s Smith said. ESPO crude refers to the export of Russian oil to Asia-Pacific markets, and is said to be popular in China’s oil refineries.