The Russian oil trade with India is undergoing significant changes as rising funding costs and restricted access to Western financial resources have led to the exit of many smaller intermediaries. This shift has resulted in three major trading houses dominating the market, according to data and multiple trading sources.
Key Highlights:
Market Dynamics:
India has emerged as the largest buyer of Russian seaborne crude, with imports ranging from 1.8 million to 2.0 million barrels per day, accounting for more than a third of its crude oil needs. This surge follows Moscow’s invasion of Ukraine in 2022.
Concentration of Trade:
The current landscape is dominated by a few key players, including the Dubai-based trading arm of Lukoil, Litasco Middle East, and Hinera Trading. This consolidation contrasts sharply with the previous influx of smaller trading firms attracted by the potential for higher fees.
Impact of Sanctions:
Despite various sanctions imposed by Washington and Brussels targeting traders, banks, and shipowners, the emergence of new firms had previously allowed trade to continue. However, the recent increase in interest rates in Russia, which reached 21% in late October, has made financing more challenging for intermediaries.
Pricing Power Shift:
With fewer middlemen in the market, Russian producers have gained more leverage over pricing. Discounts on benchmark Russian oil, specifically Urals, have decreased to between $3 to $4 per barrel on a delivered ex-ship (DES) basis in Indian ports, down from $8 per barrel last year.
Changing Payment Structures:
As the oil trade with India becomes more established, Russian producers are now seeking pre-payments up to two weeks before cargo loading, a shift from the previous practice where payments were made weeks after loading.
Continued Demand:
Despite the rising costs and changing dynamics, volumes of Russian oil shipped to India remain near record highs, even surpassing shipments to China. Russian oil continues to be attractive to Indian buyers, being $3 to $3.5 per barrel cheaper than competing grades from the U.S. and the Middle East.