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Published: September 6, 2023
Updated: September 6, 2023

Russia's Oil Price to India Hits Record Low in July Amid Global Tensions

In a surprising turn of events, the average price of Russian oil delivered to Indian ports in July plummeted to its lowest point since Moscow's invasion of Ukraine in February of the previous year. This development, gleaned from Indian government data, has significant implications for India's oil imports and global geopolitics.

A Bargain for India:

India received Russian oil at an astonishingly low average price of $68.09 per barrel in July. This figure marked a slight dip from the preceding month's $68.16, but more notably, it represented a sharp drop from the $99.58 recorded in July 2022. This significant reduction in price has captured the attention of experts and economists alike.

Delivery vs. Discounts:

Refiners in India have traditionally purchased Russian oil on a delivered basis, where sellers manage the logistics of shipping and insurance. The July price tag for Russian oil proved to be more economical than the rates from other major suppliers. Iraq and Saudi Arabia, for instance, charged average prices of $72.69 and $81.68 per barrel, respectively, during the same month.

A Shift in Dependence:

Historically, India has relied on imports to satisfy over 80% of its total oil requirements. Russian oil, however, was not a frequent choice due to high transportation costs. Since Russia's invasion of Ukraine over a year ago, India has emerged as the largest buyer of seaborne Russian crude. This shift in dependence on Russian oil has been remarkable.

A Decline in August:

Despite its increased reliance on Russian oil, India's imports from Russia experienced a dip in August, reaching a seven-month low. Trade flow data from Kpler and Refinitiv attribute this decline to maintenance outages and diminishing discounts. The downward trend began in June as discounts on Russian oil became less lucrative.

Navigating Global Tensions:

Discounts on Russian oil for October loading are currently below $5 per barrel, dissuading some buyers as the oil prices at Russian ports exceed the $60 per barrel ceiling set by Western nations to curb Moscow's oil revenue. This, coupled with payment problems, may lead Indian refiners to reduce imports of Russian oil, as suggested by a government source in July.

The unprecedented drop in the average price of Russian oil to India in July 2023 has major implications for both countries and the global oil market. As India balances economic interests with geopolitical concerns, the dynamics of oil imports continue to evolve in an ever-changing world.