Indian state refiners may buy Mideast spot oil to replace Russian shortfall

NEW DELHI: Indian state refiners are considering tapping the Middle East crude market as spot supply from their top supplier Russia have fallen, three refining sources said, in a move that could support prices for high-sulphur oil.

The three large state refiners- Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum - are short of 8-10 million barrels of Russian oil for January loading, the sources told Reuters.

The refiners fear continued problems in securing Russian oil in the spot market could continue in coming months as Moscow’s own demand is rising and it has to meet commitments under the OPEC pact.

However, they added that they can draw from their inventories to meet crude processing needs in March.

Two of the sources said their company may lift more crude from Middle East suppliers under optional volumes in term contracts or to float a spot tender for high-sulphur oil.

IOC, the country’s top refiner, previously floated spot tenders to buy sour grades in March 2022.

The companies did not immediately respond to requests for comment.

India became the largest importer of Russian crude after the European Union, previously the top buyer, imposed sanctions on Russian oil imports in response to the 2022 invasion of Ukraine. Russian oil accounts for more than a third of India’s energy imports.

Russia’s spot crude exports have fallen since November as its refineries resumed operations after the maintenance season and poor weather disrupted shipping activities, traders said.

“We have to explore alternative grades as Russia’s own demand is rising and it has to meet its commitments under OPEC,” said another of the three sources.

Russia, an ally of Organization of the Petroleum Exporting Countries, promised to make extra cuts to its oil output from the end of 2024 to compensate for overproduction earlier.

Also, most supplies from Russia’s state oil firm Rosneft are tied up in a deal with Indian private refiner Reliance Industries, Reuters reported earlier this month.

The new deal accounts for roughly half of Rosneft’s seaborne oil exports from Russian ports, leaving little supply available for spot sales, sources told Reuters earlier this month.