India's State Oil Refiners Struggle to Secure Russian Crude Supplies

India's state-owned oil refiners are facing difficulties in procuring sufficient volumes of Russian crude oil, reports Bloomberg, citing sources familiar with the matter. Executives from three of India's government-controlled processors revealed that they have been unable to secure adequate quantities of Russian crude for January loading in the spot market.

The sources, who requested anonymity due to a lack of authorization to speak publicly, indicated that state refiners, including Indian Oil Corp., Bharat Petroleum Corp. (BPCL), and Hindustan Petroleum Corp. (HPCL), fell short of their target of acquiring at least six million barrels of Urals crude through spot purchases.

The reasons behind the reduced availability of Russian crude remain unclear, but several factors may be at play. The existence of a long-term contract between Rosneft PJSC, a major Russian oil producer, and Reliance Industries Ltd., a prominent Indian private refiner, coupled with increased Russian domestic oil processing rates, may have contributed to lower crude oil exports.

Sources also suggested that Moscow's strategy may involve prioritizing long-term contracts directly with Russian producers over spot cargoes sold by traders. While private Indian refiners utilize a combination of spot and long-term contracts for Russian crude procurement, state-owned companies currently rely solely on the spot market.

Moscow has reportedly been actively encouraging Indian companies to transition to long-term contracts for Russian oil imports. This approach typically involves agreements between Russian state-run firms, such as Rosneft PJSC and Gazprom Neft PJSC, and Asian buyers. While the Indian government supports this shift and encourages both state and private refiners to collectively negotiate for favorable terms, some government-linked processors have reportedly been unable to accept the proposed prices and conditions.

In early December, Reuters reported that Reliance Industries had independently secured a 10-year deal with Rosneft for 500,000 barrels of crude per day. This move, according to sources cited by Bloomberg, has raised concerns among state companies that Reliance's actions have weakened India's overall bargaining power in negotiations with Russia. They further suggest that this deal may have incentivized Russia to prioritize direct sales through long-term contracts, thus limiting the availability of spot cargoes.

Indian Oil, BPCL, and HPCL did not immediately respond to requests for comment on the matter. Indian Oil previously held a term contract with Russia for 490,000 barrels per day for the fiscal year ending in March.