Major Indian oil refineries have begun turning away from Russian crude this autumn because of rising logistics costs, switching to alternative suppliers that offer cheaper crude supplies.
Iraq and Saudi Arabia have started crowding Russia out of its key oil market by offering deep price discounts to Indian buyers, according to market data reported by Bloomberg.
The price cuts have stimulated strong demand, making Russian crude disadvantageous for Indian importers under current conditions. Analysts explained that Russian oil is currently selling at a premium of about $2 to the Brent benchmark.
Suppliers from Iraq are currently selling some oil shipments at a discount of more than $25 a barrel compared to the Dubai benchmark. With shipping costs included, the discount makes Iraqi crude several dollars cheaper than North Sea Brent.
Iraq is not the only regional supplier offering substantial price reductions. The trading division of Saudi Aramco recently sold a large batch of Khafji crude at a discount of up to $10 a barrel compared to the Dubai benchmark.
The Abu Dhabi National Oil Company also sold around 20 million barrels of crude with a small discount in early November.
Against that backdrop, supplies of Russian oil to India have dropped sharply, noted Vetsa Ramakrishna Gupta, the head of the finance department at the energy company Bharat Petroleum.
Shift in Indian refinery imports
India is the world's third largest crude importer and consumer, relying on foreign purchases to meet more than 80 percent of its domestic petroleum needs. Indian refiners became the primary buyers of discounted Russian seaborne oil following Western sanctions over the 2022 invasion of Ukraine, absorbing barrels that were redirected away from traditional European markets.
Long maritime distances have made that trade increasingly expensive. Tankers carrying Russian crude from western ports on the Baltic Sea and Black Sea must travel thousands of nautical miles to reach Indian refineries, incurring high freight rates and insurance fees. By contrast, vessels loading crude in the Persian Gulf cross the Arabian Sea to western India in only a few days.
Pricing benchmarks and market outlook
Pricing benchmarks also reflect those distinct geographical routes across the global oil trade. Dubai crude serves as the regional benchmark for Middle Eastern grades shipped to Asian refiners, while North Sea Brent acts as the primary international standard. Bharat Petroleum Corporation Limited is one of India's major state-controlled refining and marketing firms, operating large facilities in Mumbai and Kochi.
Saudi Aramco is the state-owned energy enterprise of Saudi Arabia and the world's largest oil exporter, with its trading division handling commercial transactions across Asian energy hubs. Khafji is a heavy, sour crude grade produced in the offshore Partitioned Neutral Zone shared by Saudi Arabia and Kuwait.
Gupta said that the current downward trend in Russian deliveries is expected to persist through October and November, as crude shipments from Persian Gulf countries continue to expand.
