The current practice of purchasing crude in the spot market subjects buyers to volatility and usually entails a higher price
India’s state-owned oil refiners are in talks with Russia about clinching long-term supply deals, the news outlet Business Standard reported this week, citing sources at the country’s Ministry of Petroleum and Natural Gas. Agreements could reportedly be sealed as soon as next April when the new fiscal year starts.
India, the world’s third-largest consumer of crude oil, depends on imports for up to 85% of its needs. Russia is India’s top oil supplier, and New Delhi has often noted that Moscow has been instrumental in ensuring the nation’s energy security. Nevertheless, while India’s private refiners already have annual deals for Russian oil supplies, the state companies have tended to buy it in the spot markets, reserving long-term contracts for sources from the Middle East.
According to the ministry’s sources, however, the high volatility in spot prices has rendered this arrangement no longer attractive for the state refiners. Long-term deals are expected to help avoid price swings and provide India with steady access to Russian oil at a lower price.
India stepped up purchases of Russian crude in 2022 shortly after the outbreak of the Ukraine conflict and the first rounds of Western sanctions on Moscow. New Delhi has taken advantage of the discounts Moscow offered on its oil after the latter effectively lost its traditional buyers in the West.
Last month, India even overtook China as the largest buyer of Russian crude. Ramping-up purchases of Russian oil not only helped India bolster its domestic energy security, but made it one of the leading exporters of petrochemicals to Europe. India’s exports of refined oil products to European countries jumped by 2,539 times since 2018, The Print reported earlier this month, citing data from the Ministry of Commerce and Industry.
Western states have been pressuring India to stop buying Russian oil, but New Delhi has remained adamant that it would continue to do so. Indian officials have also argued on more than one occasion that the decision to buy Russian oil has helped prevent a global energy crisis. In an interview with RT in July, India’s minister of petroleum and natural gas, Hardeep Singh Puri, stated that without Russian oil on the market, global prices would have hit $250-300 per barrel.
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