Despite fears of higher global oil prices, India expects to continue purchasing crude from Russia at discounted rates as long as crude hovers below $90 a barrel as New Delhi wants to maintain the cap imposed by the G7 nations, a senior government official said.
With few takers for Moscow's oil, India is confident that Russia will not push to breach the $60 per barrel ceiling for Russian crude even as prices go up, the official told Moneycontrol.
"Russia does not have an option but to ensure the cap and sell it to us (India) because they are out of buyers. India is not looking to breach the cap of $60," the official said, adding that since some payments for oil from Moscow are being made using a mix of currencies such as dirhams, it could help both nations to contain the price.
Australia, Britain, Canada, Japan the US and the 27-nation European Union in December 2022 agreed to set an upper limit of $60 a barrel for seaborne Russian crude oil. This was the outcome of Moscow's conflict in Ukraine, which aimed to put an economic squeeze on Russia.
India, on the other hand, has been purchasing greater amounts of crude from Russia to take advantage of deeper discounts. New Delhi's imports from Russia, the former’s second-largest import source nation, surged 96.26 percent in April-July to $20.45 billion primarily due to oil purchases.
To be sure, crude oil prices have seen a 5 percent drop over the week due to slowing growth in China and the possibility of further US interest rate hikes weakening fuel demand in the world's two biggest economies. As recently as August 10, though, prices had climbed to a nine-month high.
Major benchmarks did not see significant changes on Friday, with the US West Texas Intermediate crude (WTI) up 10 cents, or 0.1 percent, at $80.49 a barrel, while Brent crude was flat at $84.12 a barrel as of 02:05 GMT.
The Indian government has been monitoring the movement in global oil prices and the levels are not "alarming" yet, the official said.
Diversifying oil imports
India may be looking to diversify its export and import baskets to limit the impact of global headwinds and a demand slowdown across major trading partners, but when it comes to crude, the world's third-largest oil importer has no option or plans of branching out and will continue to ship the majority of its crude requirements from Russia, the official said.
This is because India, which imports around 85 percent of its energy requirements will have to pay a much higher price for crude from traditional partners like Saudi Arabia, who have imposed quantitative cuts, the official said.
Riyadh announced a cut in output by 10 percent in July, which was on top of cuts in May and June that would push the country’s production down to levels rarely seen in the last decade.
Saudi Arabia and the United Arab Emirates (UAE), among others, have been the traditional crude oil import source nations for New Delhi.
According to the Indian government official, prices will go up if India stops purchasing crude from Moscow at a time when most nations are avoiding Russian crude and India would have to start competing with Europe to buy oil from Saudi Arabia and Nigeria.
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