India, the world’s third-largest oil importer and consumer, has been hit hard by rising crude prices, with pump prices hitting record highs in some states.
State oil producer Saudi Aramco, the world’s largest oil exporter, has raised crude prices for all regions, with those to Asia reaching historic 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 lift the quantity 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 steep discount to the dated Brent benchmark, citing “national interests”.
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 loading in May on a pound basis, similar to purchases for the whole of 2021, according to Reuters calculations.
Companies mostly bought Russian Urals, a quality similar to 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 Basra oil. .
in turn, more Gulf crude, as well as some West African blends, could end up in Europe, one of the Indian refiner’s sources said.
“In addition to changing trade flows, changes in buying habits are likely to increase freight costs as there will be long distance journeys,” Haq said.
Although Russian imports cover 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.