What Reliance’s Cut in Russian Crude Purchases Mean for India
Reliance Industries Ltd. An oil refinery in Jamnagar, Gujarat, India, on Saturday, July 31, 2021.
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Reliance Industries is the largest private oil refining company in India According to reports Stopping purchases of Russian crude below US sanctions decision Russia’s two largest oil companies are Rosneft and Lukoil.
Reliance has become a major buyer of Russian crude. In September, it bought about 629,590 barrels per day of Russian crude from the two companies, out of India’s total imports of 1.6 million barrels per day, according to data from commodity data analytics firm Kepler.
In the same month last year, Reliance bought around 428,000 barrels of oil per day from Russian companies.
In fact, Russian crude imports to India used to be less than 3% of its total crude import basket, but today account for one-third of India’s crude imports, experts say.
Reliance did not respond to CNBC requests for comment on reports that it is halting purchases of Russian crude.
This comes as the US Treasury Department charged on Wednesday Approval on Rosneft and Lukoil, citing Moscow’s “lack of serious commitment” to ending the war in Ukraine. The sanctions are aimed at “degrading” the Kremlin’s ability to finance the war, the US department said, adding that further measures could follow.
If Reliance stops Russian purchases, “(Reliance’s) margins and profitability will be negatively impacted as Russian crude accounts for more than 50% of (its) crude feed,” Pankaj Srivastava, SVP of commodity oil markets at market research firm Rystad Energy, said in emailed comments.
He added that “availability of similar crude is not an issue” and that it can be sourced from West Asia, Brazil or Guyana, but Reliance is unlikely to get the same price as Russian crude, as it has long-term deals with suppliers such as Rosneft.
Last December, Reliance Industries signed a deal to import crude oil worth $12 billion-$13 billion per year for 10 years from Russia’s Rosneft, which translates to roughly 500,000 barrels per day, according to a report. Reuters.
‘Opportunistic Buying’
Vandana Hari of Vanda Insights said the purchase of Russian oil by Indian refiners was “opportunistic buying” driven by discounts versus comparable grades.
India bought 38% of Russia’s crude exports in September, second only to China at 47%, according to the Center for Energy and Clean Air, a Helsinki-based think tank.
Hari added that Indian refineries can easily buy from sources and the trade-off is “pressure on refining margins”.
Muyu Xu, senior crude oil analyst at Kpler, said the Indian refining company could face some short-term problems as it could replace Russian crude.
“Given the large sums under the Reliance-Rosneft deal, Reliance expects some short-term friction in securing replacement barrels,” says Mu Xu, senior crude oil analyst at Kepler.
She added that “Russia’s medium-sour Urals is about $5-6/bbl (barrel) cheaper than equivalent Middle East crude.”
The impact of Reliance Industries’ divestment from Russian oil was “manageable”, Jefferies said in a report last month.
The brokerage said in September that it has received questions from investors about the potential financial impact on Reliance if it stops importing Russian oil due to the sanctions.
Russian crude leveraged about 2.1% of the company’s estimated consolidated EBITDA of 2.05 trillion rupees ($22.8 billion) for fiscal 2027, the brokerage said.
Reliance’s consolidated EBITDA for the six months of fiscal 2026 was 1.08 trillion Indian rupees ($12.3 billion), of which 295 billion rupees came from its oil-to-chemicals division, while telecom and retail activities together contributed about 500 billion rupees.
Hopes for a US trade deal
Other Indian refiners are also looking To reduce imports Russian oil. While the shutdown of Russian oil could increase India’s import bill, “if crude is in the $70 or $80 range, it probably won’t be a big shock,” said Hari of Vanda Insights.
US West Texas Intermediate Futures It was trading around $61.83 a barrel on Friday.
Experts also say that the benefits of India’s reduction in Russian oil purchases are minimal.
According to Trinh Nguyen, senior economist at Natixis, the arbitrage offered by Russian oil during the energy crisis has diminished and India no longer needs to buy Russian oil significantly.
India’s purchase of Russian crude has been a sticking point in trade relations with the US, culminating in the US imposing a total of 50% tariffs on Indian exports to the US.
As state-owned and private refiners are expected to stop buying Russian crude – a long-standing demand of US President Donald Trump – India is increasingly likely to negotiate a mutually beneficial trade deal with the US.
— CNBC’s Ying Shan Lee contributed to this report
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