Why shouldn’t Indian refiners negotiate good discount on long-term oil deal with Russia: Puri

New Delhi: Stressing that India holds the ‘market’ card due to its large oil appetite, Minister for Petroleum and Natural Gas Hardeep Singh Puri endorsed the idea of Indian refiners jointly negotiating a long-term oil deal with Russia. On being asked to comment on speculative reports on the same during a press interaction on Wednesday, Puri said, “Why should the Indian refiner not want to negotiate a good discount on a long-term basis? Why is that a surprise? You are holding one of the most important cards in your hand, which is the market card, which means that 5 million plus barrels a day are consumed in India.” He, however, added that he is not aware if such a negotiation is underway but said that he supported the idea.

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Reports in the media said that the government has asked refiners, both private and public, informally to lock-in at least a third of their contracted supply from Russia at a fixed discounted price to shield the economy from the volatility in the crude oil markets.

India is one of the largest consumers of crude oil globally, consuming nearly 5 million barrels/day (mb/d). According to official data, in FY2023-24, Indian refiners processed 5.24 mb/d. The figure was 5.13 mb/d in FY2022-23 and 4.85 mb/d in FY2021-22.

Russia offering most of its oil in the spot market

Russia has been offering most of its oil in the spot market, with prices hovering around USD 70/barrel in May. Indian Oil Corporation (IOC) was the only Indian state-run refiner which had a long-term oil supply deal with Russia’s Rosneft, but the deal lapsed in March. A report by Reuters said that IOC and Rosneft were not able to renew the oil supply deal as the two were unable to agree on price and volumes, forcing India’s largest oil refiner to turn to spot markets.

Earlier in May, another state-run oil refiner, Bharat Petroleum Corporation Limited (BPCL) said during an investors' call conference that it has plans to slash its crude oil imports from Russia in the current fiscal as discounts offered by Russia have moderated. The PSU’s management told investors that while they were getting discounts of USD 8-10/barrel on Russian crude last year, this year, the discounts are expected to be lower, potentially in the range of USD 3-4 or USD 3-6 per barrel.

Global oil prices holding up well amid uncertainties: Puri

Global oil prices have been holding up well against global uncertainties and despite production cuts announced by the Organisation of Petroleum Exporting Countries (OPEC), said Puri, referring to the wars in Ukraine and Gaza and the death of Iranian President Ebrahim Raisi in a helicopter crash. “My understanding is that there is a certain amount of uncertainty. What is the uncertainty? There are two and a half theatres of conflict. There is also talk of some other uncertainty. There has been a tragic incident in one of the oil producing countries. The helicopter crash. Taking all that into account, the oil prices are still holding,” said the minister.

“All the people who are invested in this ecosystem, they think that all the major stakeholders don’t want large-scale hostilities to break out,” he added. Brent crude hovered around USD 82/barrel on Wednesday.

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