New Delhi: India may receive more Russian crude this winter as shipping patterns make the country a more attractive destination for Russian barrels, but US President Donald Trump’s 60-day waiver is unlikely to make the oil significantly cheaper, analysts have told ThePrint.
The US President’s waiver last week—which removes the immediate threat of punitive US sanctions and tariffs on countries buying Russian oil—will provide greater certainty to Indian refiners. However, the waiver itself is unlikely to significantly change India’s crude buying strategy, with purchases continuing to depend on discounts, freight costs and competition from China.
India’s Russian crude supplies could rise from November as shipments to China through the Northern Sea Route are likely to decline with the return of Arctic ice. Between September and October, only 12 cargoes carrying Russian oil transited the route to China.
For Russian crude grades such as Urals and Siberian Light, which are shipped from Russia’s Baltic Sea ports, India is likely to become a more attractive destination than China as the Northern Sea Route closes for the season, with the shorter voyage translating into lower freight costs, said Natalia Katona, a commodity analyst based in Abu Dhabi.
This could result in more Russian crude arriving in India over the winter, although the increase would be driven more by shipping economics than by the US waiver.
According to Abhishek Kumar, senior oil analyst at Sparta Commodities, a market intelligence firm on oil trading, the waiver primarily removes the risk of punitive US tariffs rather than changing India’s crude buying strategy.
“India has continued purchasing Russian crude despite sanctions, and this decision provides greater policy certainty,” he told ThePrint.
Waiver unlikely to bring down crude prices
The buying behaviour of India and China much before Trump announced the waiver also suggests that the two countries were not significantly changing their Russian oil purchases in anticipation of the sanctions.
Spot crude is generally purchased around two months in advance. Both China and India had reportedly completed their November purchases of Russian oil in the first half of September, rather than spreading purchases through the month as they normally do, Katona said.
The waiver has also not resulted in a decline in oil prices, despite Trump saying the move would help bring prices down. Persistent geopolitical risks, including tensions around Saudi Arabia and continued Houthi attacks, are however keeping the market volatile.
As of Tuesday, international Brent crude was trading at around $110 per barrel.
Katona said the political pressure behind the Lindsey O. Graham legislation had not translated into a major change in market expectations, as traders had already anticipated that a waiver could be granted. The latest decision, therefore, is unlikely to significantly alter the physical oil market.
Kumar also said the waiver was unlikely to materially lower global crude prices, with its impact likely to be greater on market sentiment than on physical supply. “Russian crude was already flowing, mainly to India and China.”
For Indian refiners, the price of Russian crude will continue to depend on the discount available against competing grades, freight costs and refined-product margins.
In recent weeks, Russian Urals crude has also become more expensive relative to benchmark prices. Katona said the grade, which was trading at a premium of around $8 a barrel to Brent a month ago, has now moved close to parity with the benchmark.
While this makes Russian crude relatively more competitive for Indian refiners, it does not necessarily mean that the overall price of the barrel has become cheap. The price of Russian crude will continue to be influenced by broader movements in international oil prices and shipping costs.
For refiners, any benefit from the US waiver will consequently depend on whether Russian crude remains competitive after factoring in the overall delivered cost.
Kumar said the waiver alone was unlikely to materially improve refining margins, as Indian refiners were already accessing discounted Russian crude. Any improvement would depend on further discounts, freight economics and product cracks.
Lower crude prices could, however, provide some relief to Indian oil marketing companies if domestic retail fuel prices remain unchanged, as lower input costs would improve margins.
The immediate benefit for India from the waiver is therefore greater certainty around Russian oil purchases rather than a dramatic change in crude flows or prices. While Russian crude arrivals could increase this winter because of shipping economics, Indian refiners will continue buying the barrels if their delivered cost remains attractive compared to alternative supplies.
(Edited by Gitanjali Das)
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