India’s top refiner, Indian Oil Corp (IOC), and Russian energy giant Rosneft have yet to finalize a renewal of their oil supply deal, which expired in March, due to disagreements over price and volumes. As a result, IOC is now seeking to procure Russian oil from spot markets, according to three sources familiar with the situation. The annual oil agreement between IOC and Rosneft, initially signed during Russian President Vladimir Putin’s visit to India in December 2021, lapsed on March 31.
While the possibility of a future deal remains if terms can be agreed upon, IOC is currently turning to spot markets for its Russian oil requirements. India has been capitalizing on discounted Russian oil following sanctions imposed by Western nations in response to Moscow’s actions in Ukraine, with Russia emerging as the primary supplier to India, the world’s third-largest oil importer. The previous annual contract between IOC and Rosneft provided a monthly supply of 1.5 million metric tons (360,000 barrels per day) at a discount of $8-$9 per barrel to Dubai quotes on a delivered basis. Indian state refiners, including Bharat Petroleum Corp and Hindustan Petroleum Corp, were collectively negotiating with Rosneft for up to 400,000 barrels per day in a yearly contract starting from April 1.
However, Rosneft’s offer of 4-6 cargoes per month totaling up to 4 million barrels fell significantly short of the Indian refiners’ requirements. Additionally, Rosneft proposed a discount of $3-$3.50 per barrel to Dubai quotes under the term deal, aligning with spot market levels. Despite ongoing challenges and payment issues related to purchasing Russia’s Sokol grade oil, Indian refiners have continued to navigate the complexities of sourcing Russian oil amidst geopolitical tensions and sanctions.