Indian refiners are pivoting from Russian crude to Persian Gulf barrels as skyrocketing freight costs erode the economics of long-haul shipments. Iraqi cargoes are being offered at discounts of more than $25 a barrel to the Dubai benchmark before shipping, translating to several dollars a barrel below Dated Brent on a delivered basis. Russian crude, by contrast, carries a $2 premium, making purchases uneconomical, said Vetsa Ramakrishna Gupta, CFO of Bharat Petroleum Corp., noting Russian cargoes "significantly reduced" in November.
The shift extends beyond Iraq. Saudi Aramco sold prompt-loading Khafji crude at discounts up to $10 a barrel to the Dubai benchmark, while Abu Dhabi National Oil Co. moved about 20 million barrels earlier this month at a small discount. Hindustan Petroleum Corp. Chairman Vikas Kaushal said Gulf producers are offering discounts deep enough to offset "astronomical" freight rates. Middle East flows have recovered to near prewar levels despite shipping attacks.
Russia remains India's top supplier, but its share is eroding. Bharat Petroleum sharply cut Russian purchases in October, and November imports from Russia are now lower than Gulf supplies. Larger rivals Indian Oil Corp. and Mangalore Refinery and Petrochemicals Ltd. have also reduced Russian buys. Refiners are chartering their own tankers for Gulf crude, gaining control over freight costs that Russian delivered cargoes deny them.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing