Indian refiners are jointly negotiating to purchase Russian oil for next year, a government source said on Thursday, with suppliers mostly using Russian insurance for crude priced above a $60 per barrel cap.
Russia is India’s top oil supplier, and the world’s third biggest oil importer and consumer is also Moscow’s top client for seaborne oil.
Private refiners in India this year signed annual deals for Russian oil supplies while state refiners are buying from spot markets.
India also relies heavily on Middle Eastern producers and its refiners have annual oil imports deals with major oil producers in the Middle East. The source said discussions with Middle Eastern suppliers for term deal for next year will begin in December.
Asked if the Indian companies would seek better terms from oil producers for the import deals, the source said, various agencies have brought down their global oil demand estimates.
“The negotiations positions would be different from last year… In a country where demand increases and in a world where demand is decreasing, you can draw your own conclusion”.
Oil Minister Hardeep Singh Puri on Wednesday said India will continue to buy Russian oil from non-sanctioned entities, since prices are cheap.
Russian insurers are playing a growing role facilitating the country’s oil shipments to India, its biggest buyer, Reuters reported on Wednesday.
By using Russian insurers, Moscow can sell the oil above a $60 per barrel price cap that the Group of Seven (G7), the European Union and Australia imposed aiming to limit Russia’s oil revenue following its invasion of Ukraine.
“Sometimes, even if the price is at borderline or near the price cap, then also the sellers don’t want to take a risk and use Russian insurance… If the cargo is below $60 dollars then it can be covered by western insurers,” the source said.
Indian refiners use Emirati Dhirams and US dollars to pay for Russian oil purchase. “Russian oil which is below $60, the payment is happening in dollars,” he said, adding in the past Indian refiners also used Rupees and Chinese Yuan to settle some payments.