Discount on Russian Urals oil shipped to India is smallest since 2022, traders say
Narrowing discounts and lower supply of spot Russian barrels will push Indian refiners to look for alternative oil like United Arab Emirates' Murban or U.S. West Texas Intermediate (WTI) grades, traders said.
The narrowing discount shows how Moscow is managing to keep its oil sales up despite Western sanctions, while its discounted oil is getting more expensive than before, though still cheaper than alternatives.
Spot discounts for Urals crude narrowed to $1.70-2 per barrel to dated Brent on delivery ex-ship (DES) basis on average for cargoes arriving in India in August, from $2 to $2.50 per barrel to dated Brent on DES basis in July, the traders said.
That is the narrowest discount for Urals oil cargoes to dated Brent in Indian ports since the Ukraine war broke out in 2022.
Meanwhile, as the Russian oil grade is traded against Brent benchmark, its outright price has been mostly below the West's $60 per barrel price cap since April this year, allowing Western companies to provide shipping and insurance service for the barrels.
India's industrial output growth slows to nine-month low in May
Urals oil prices are supported by high demand in India and Turkey, the two largest buyers of the grade, traders said.
Turkey's imports of Russia's Urals crude rose in June to their highest level since May 2024 on healthy refinery margins and seasonal demand for motor fuels, LSEG data showed.
Meanwhile, Urals oil loadings are set to decline in July from June amid higher refinery runs in Russia.
Russian oil supply is also set to decline in August amid a planned shutdown for maintenance of output on the Sakhalin-1 project that exports Sokol oil.
India has been the largest buyer of Russian seaborne crude after Moscow diverted its energy supply away from the European Union, which imposed a ban late in 2022.
Several Indian refiners that normally buy Russian oil on the spot market are not getting enough Urals oil for delivery in August, the sources said. India is exploring building three new strategic oil reserves to boost its emergency stockpile and strengthen energy security.
Large volumes of Russian Urals oil are shipped to India under the deal between the country's largest private refiner, Reliance Industries, and Russian oil giant Rosneft last year, limiting the crude offered in the spot market, traders said.
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