India state refiners may shift away from Russian oil

Indian state refiners may shift away from Russian oil because of slimmer discounts and payment difficulties and increase their intake of crude from their traditional Gulf suppliers like Iraq and the UAE, which are willing to offer increased credit periods, a petroleum ministry official said. The discount on Russian oil has now deeply eroded and so it doesn 't make sense to buy much from Russia, the official did not want to be named. The official didn t give any details on the current discount level. Indian state refiners have never had discounts similar to the ones reported by the assessors, as they take all Russian supplies on a delivered-at-port basis, which means the entire risk of logistics is with the suppliers. At their peak last year, discount rates for Indian refiners were about $12 - 13 per barrel, while discounts in international markets were about 30 - 32 barrels. Discounts available to Indian refiners quickly fell to $6 - 7 per barrel. Now, they have also reduced. Urals, the top Russian crude, is now breaching the G - 7 price cap of $60, presenting another headache for refiners. payment is an issue and state-run refiners will not be able to pay for Russian oil if prices remain above the cap, the official said. If they are not able to pay, it will hurt their credibility, he added, adding that state refiners have taken only those Russian grades that traded below the price cap. Indian refiners have paid in yuan, dirham, and dollars for Russian oil, but all these imports were priced below the cap. Iraq and the UAE are willing to offer longer credit periods and are closer to the Indian shores, the official said, arguing that it will make more sense to source more from these countries than Russia. The official didn't provide details on whether Iraq's prices were as competitive as Russia despite the decrease in discounts on Russian oil. Typically, suppliers offer a credit period of 30 days, but Iraq and the UAE are offering 60 days, the official said. However, industry executives said it won't be easy to replace Russian oil so quickly because it comprises 40% of India's crude imports now. Russia's imports are directed to state-run refiners. A discount of just a dollar per barrel is also a big gain for refiners since the volume involved is huge and, therefore, Indian refiners will not like to leave it, he said. The credit period is not as big an attraction as the price discount, as the former involves currency risk, the executive said. Urals has surged to $62 on the global benchmark Brent, which has hit $80 per barrel, aided by supply cuts by producers, mainly Saudi Arabia and Russia. Urals account for about three-quarters of India's imports of Russian oil. The official said other grades of Russian oil, which have long been trading above the G-7 price cap, have been imported only by private players.