India bought Russian Urals oil in December at a price well below the $60 upper limit agreed upon by the West. About it writes Reuters , citing four sources in the market.
Since December 5, the European Union has imposed a ban on seaborne imports of Russian oil, and Russia has had to look for alternative markets, mainly in Asia, for about 1 million barrels per day, the agency said.
In addition, since December 5, the mechanism of limiting prices for Russian oil came into force , which prohibits the provision of services to Russian companies if the price of oil is above $60 per barrel. Russia has said it will not adhere to this cap even if it has to cut production.
Two traders told the agency that the West's actions had put Russian producers in fierce competition with each other and with suppliers from Asia, Europe and the Middle East, so they had to cut prices.
Since the beginning of the war in Ukraine, India has become the main market for marine cargoes of Urals oil.
This month, the price of Urals oil in Indian ports, including insurance and shipping, has fallen by about $12 to $15 a barrel from the average monthly price of Brent crude, sources told Reuters. In some cases, oil is being sold below total cost of production, including local fees, industry sources said.
In addition, in Russia's western ports, pressure on manufacturers has intensified due to the lack of ships adapted to the Russian winter, which has led to an increase in freight costs. These costs are usually the responsibility of the seller. Freight rates rose to $11-19 a barrel, up from less than $3 a barrel before February, and roughly double the prices seen in the middle of the year.
Reuters calculations showed that discounts on Urals oil in Russia's western ports for sale to India for some transactions rose to $32-35 per barrel, excluding freight costs.
Now, according to traders, Russian oil suppliers are mainly trying to transport Urals oil to India on their own and use their own ships and shipping partners to do this, hoping to reduce transportation costs. However, many oil producers still rely on trading firms and therefore have to share profits with them.
The agency notes that India is better placed to buy Urals oil than China because the route to it is shorter and its refineries are well equipped to process Russian oil.
India also recognizes ships and insurance coverage provided by Russian companies that are no longer recognized in Europe.
Oil shipments to India rose to at least 3.7 million tons in November and hit a record 53.2% of total shipments through seaports last month, according to Refinitiv Eikon.
In November, Reuters, citing market participants, wrote that Indian companies began to reduce purchases of Russian oil in anticipation of new Western sanctions. Local companies are afraid of the restrictions that will follow due to the continuation of cooperation with Russia, and also note the market uncertainty caused by sanctions, the agency noted.
However, as reported, not all companies decided to play it safe and not take risks: for example, the state-owned Indian Oil Corporation (INC) asked Russia for oil supplies even after December 5. The company intends to receive Russian oil in order to minimize the risks of interruptions in production processes. A source close to the company explained the continuation of cooperation with Russia by the impossibility of quickly rebuilding already established supply chains. He also noted that, unlike other companies, INC could not promptly switch to supplies from the Middle East.
Nayara Energy was going to continue to buy Russian oil, however, the reasons for this are quite obvious: 49% of the company belongs to the Russian state company Rosneft, for which restrictions have already been introduced against it at the international level. International banks have not cooperated with the company for a long time, and it conducts all financial transactions through local financial organizations.