Indian Oil Corp Set to Tap Spot Oil Market as Russian Term Deal
Indian Oil Corp (IOC) sources discounted Russian oil due to Western sanctions, forcing Rosneft and Indian Oil Corp to renew their oil supply deal.
Rosneft and Indian Oil Corp (IOC) have yet to renew an oil supply deal that expired in March as they have been unable to agree on price and volumes, forcing India’s top refiner to turn to spot markets, three sources with knowledge of the matter said on Monday.
IOC and Rosneft renewed the annual oil deal for a second time a year ago. It was originally signed during Russian President Vladimir Putin’s visit to India in December 2021, months ahead of Moscow’s military action in Ukraine.
State-run IOC’s term contract with Rosneft expired on March 31, two sources said.
“The deal for 2024-25 has not been renewed,” said one of the sources.
Two of the sources said that IOC and Rosneft may still sign a deal if they can agree on terms, but in the meantime the Indian firm would buy Russian oil from the spot markets.
New Delhi has been gorging on Russian oil sold at a discount after Western nations shunned purchases and imposed sanctions on Moscow over its invasion of Ukraine, with Russia becoming the top supplier to the world’s third largest importer.
IOC’s annual oil purchase contract with Rosneft provided 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.
IOC and other state refiners Bharat Petroleum Corp and Hindustan Petroleum Corp were jointly negotiating with Rosneft for up to 400,000 barrels per day of oil in a yearly contract from April 1, sources previously told Reuters.
However, Rosneft offered to supply 4-6 cargoes a month, or a total of up to 4 million barrels, significantly lower than what Indian refiners had together sought, two of the sources said.
Also, Rosneft had offered a discount of $3-$3.50 per barrel to Dubai quotes under the term deal, similar to levels available in spot markets, two sources said.
Rosneft, IOC , BPCL and HPCL did not immediately respond to requests for comment.
India has continued to buy Russian oil despite problems posed by a raft of sanctions.
However, Indian state refiners decided against lifting Russia’s light sweet c during joint negotiations with Rosneft due to payment problems.
IOC is still struggling to make payment for three c cargoes purchased last year, the two sources said.
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