INVC NEWS
Mumbai : Russia has reduced the discount on the price of crude oil and Iraq is offering crude oil at lower prices to regain its influence in the oil reaching India. For this reason, local refineries are importing more oil from Iraq. Industry officials say that due to expensive import of crude oil from Russia, the gross refining margin of oil companies has decreased in the last quarter of the financial year 2023-24.
Calculations based on customs data show that in 2023-24, Russian oil was cheaper than Iraq’s crude by about $ 3 per barrel, whereas in the previous financial year it was cheaper by $ 7 per barrel. Till two years ago, India used to buy most of its crude oil from Iraq, but due to the sanctions imposed after the start of the Russia-Ukraine war, Russia was forced to sell its oil to China and India at very low prices.
India took full advantage of the opportunity and bought oil in large quantities from Russia. Due to this, Russia became the country that sold the most oil to India in the last financial year. Russia imported crude oil at an average of $76.4 per barrel in FY2024, while the cost of importing oil from Iraq was $79 per barrel. In fiscal year 2023, the average price of Iraq’s oil was $ 90.6 per barrel, while oil from Russia was $ 83.2 per barrel. In the last financial year, the price of Venezuelan crude oil was the lowest at $ 64 per barrel. But due to poor quality, heavy weight and high sulfur content, it can be processed only in advanced refineries like Reliance Industries’ Jamnagar plant.
Crude oil prices from Iraq reduced in 2024. Iraqi benchmark Basra oil was $2 a barrel cheaper than Russian crude in March. Customs Department data shows that the average price of Iraqi oil in March was $ 78.6 per barrel and the price of Russian oil was $ 80.6 per barrel. A Mumbai-based refiner said Indian refineries are buying heavy grade Basra crude, which is getting discounts.
Industry sources said that due to the halving of discount on Russian oil in the financial year 2024, the difference between its and Iraq’s oil prices also reduced. India’s discount on Russian oil declined by about 77 percent in the fourth quarter of FY 2023. An official of a public sector refinery said that the discount of $ 10.5 per barrel was available in the financial year 2023, which came down to $ 5.8 per barrel in the last financial year. An industry official said the new US sanctions on Russia have affected about 10 percent of Russian vessels.
An official of a Mumbai refinery said that as per the agreement of Indian refineries, Russia has to deliver the purchased oil here and any increase in freight or insurance is deducted from the discount. If the discount on crude oil from Russia remains low and the price remains at $ 85 per barrel, then the country’s net oil import bill may increase to $ 101 billion to $ 104 billion in the financial year 2025, which will be only $ 96.1 billion in the financial year 2024. Industry officials said that oil prices continue to fluctuate.
