Union oil minister Hardeep Singh Puri on Wednesday said that the government welcomes a possible joint long-term deal by a consortium of Indian state-owned refiners and Reliance Industries to secure oil supplies from Russia at a fixed discount as the country’s oil demand continues to grow.
“Over 5 million barrels per day of crude oil is consumed in india. Why should Indian refiner not want to negotiate a good discount on a long term basis. I welcome it,” Puri said.
According to a recent report by Bloomberg, the government wants its refiners to lock in at least a third of their contracted supply from Russia at a fixed discount to help shield the nation’s economy from volatile prices.
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Puri said, “I don’t know whether this report (on joint OMC-Reliance move) is correct or not because many of these are private players. Now, if somebody in the OMCs says let’s get together. I think it is a very good thing.”
Russia has emerged as a major supplier of crude oil to the country since its invasion of Ukraine primarily on the back of heavy discounts that it offered in its supplies. However, the discounts have now narrowed down to the range of $3-4 per barrel against $8-10 per barrel earlier owing to tighter enforcement of US sanctions on some vessels.
Indian Oil Corp is the only refiner to previously have a long-term supply with Russia but the contract has expired in March end and has not been renewed yet. The other two state-refiners – Bharat Petroleum Corp and Hindustan Petroleum Corp generally procure crude oil from Russia on spot basis.
“Discounts depend on consignment to consignment. Generally, we procure on spot basis, two months in advance. Last year, we used to get around $8-10 per barrel. Maybe now it will be around $3-4 or $3-6 per barrel range,” Bharat Petroleum Corporation’s (BPCL) senior management had earlier said.
The company had noted that most Russian supplies are on spot basis and not term basis. “If there are no new geopolitical tensions, no new issues, we are estimating supplies to continue at similar levels,” the management had said.
The country’s consumption of petroleum products including gasoline, diesel, and jet fuel among others increased to 19.9 million tonnes in April, up from 18.7 million tonnes during the same period last fiscal, data from the Petroleum Planning and Analysis Cell showed. Crude oil imports rose to 21.4 million tonnes, up 7% on year.
Puri also highlighted that oil prices have been holding despite uncertainties in the global oil market while pointing to the death of Iran’s 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.”
The minister expects the oil markets to remain stable highlighting that the equilibrium between supply and demand is by and large met. He noted that despite production cuts announced by OPEC+, the prices have held.
“In spite of all that, prices have held. I think there are 2-3 reasons. First, all the people invested in this ecosystem think that all the major stakeholders do not want large-scale hostilities. Secondly, the equilibrium between supply and demand is by and large being met. The issue today is different. The issue is how effective is the recovery.”
