India is trying to strike new crude-oil deals with Russia — but Russia's oil giant Rosneft doesn't have any extra oil left, report says

Russian oil giant Rosneft doesn't appear to be short of customers.

Russia's top oil producer is holding back on signing new six-month contracts with two Indian state refiners because it has already committed supplies to other buyers, Reuters reported on June 8, citing three sources with knowledge of the matter.

"They are saying they don't have volumes," one of the sources told Reuters. The source described Rosneft as being "non-committal" about signing new deals.

The development points to demand for Russian oil even amid hard-hitting sanctions and boycotts against the country over its invasion of Ukraine.

Indian refiners are among those who have been snapping up Russian oil that was priced at steep discounts to move the supplies. But Russian oil is not being sold at steep discounts anymore, particularly as insurance and freight rates have risen, Indian sources told Reuters. India can still buy Russian crude on the spot market, but it would be more expensive than longer-term deals. China has also been snapping up Russian oil. Neither country has condemned Russia's actions in Ukraine.

To meet Asian demand, Russia has increased shipments by about 20% out of the major port of Kozmino in the east of the country, Reuters reported on Tuesday, citing three sources familiar with the matter.

Russia's energy sales are keeping the country afloat amid international trade restrictions as oil prices have been soaring, gaining about 50% this year so far. Moscow could still rake in $800 million a day from oil and gas revenues this year, Bloomberg Economics reported last week. That's 20% higher than the country's oil and gas takings in 2021.

State-owned Rosneft posted record profits in 2021 and is planning to dole out record dividends to shareholders.

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India wants Russia to sell its oil at less than $70 per barrel: Report

India is trying to convince Russia to offer deeper discounts on crude oil - Delhi is looking to pay less than $70 per barrel - to offset risks in dealing with the OPEC+ producer in light of increasingly harsh financial sanctions against Moscow over its invasion of Ukraine. Sources told Bloomberg discounts are being sought to compensate for hurdles like securing financing for purchases. Bloomberg said the Indian government did not immediately comment.

At the time of writing, global benchmark Brent is trading near $108 a barrel, down from a high of nearly $130 a barrel in the war's initial days.

Indian refiners - state and private - have bought over 40 million barrels of discounted Russia crude since Vladimir Putin launched his 'special military op' against Ukraine February 24, Bloomberg said. Last month too Russia offered India discounts on a fixed one-time purchase of 15 million barrels.

Total purchases are significant in volume - 20 per cent more than Russia-India flows in 2021, according to Bloomberg calculations from trade ministry data. 

The purchases have also invited pointed remarks from the West, including the United States and the European Union, but those were countered by the government pointing out the EU too had bought more from Russia and that India welcomed competitive offers to meet domestic demand.

“When oil prices go up, I think it is natural for countries to go out and look for good deals…" he said last month in a meeting with the UK foreign secretary.

EU chief Ursula von der Leyen on Wednesday told the European parliament of a proposal to fully phase out dependency on Russian oil, crude and refined.

India - estimated to be the third largest primary fuel consumer in the world with around five million barrels daily- imports about 85 per cent of its oil needs but, historically, contribution of Russian crude is marginal.

It was less than three per cent in 2021, according to estimates by S&P Global Commodity Insights. In fact, in March government officials told Reuters imports from the US would rise by 11 per cent this year.

Purchases in the current global context - which has seen many of Russia's normal buyers turn away because of sanctions that complicate shipping and payment. The EU is prepping another wave that is expected to target Russian oil, as well as banks in Russia and Belarus, and individuals.

Complications were evident last week when it emerged India's Oil and Natural Gas Corp, ONGC, is struggling to ship 700,000 barrels of crude from Russia's Far East because of insurance and reputational difficulties.

Flow of Russian oil to India isn't sanctioned but tightening restrictions in areas like marine insurance and shipping, as well as measures against financial institutions mean maritime trade with Russia is becoming difficult.

There is also growing pressure on prime minister Narendra Modi to scale back India's relationship with Russia but that is problematic on several levels, not the least of which are access to heavily discounted crude and the fact that Moscow is a key defence partner.

For its part Moscow is keen to keep supplies flowing to India since Delhi represents a valuable (and steady) source of revenue for Putin as he looks to fund his military efforts in Ukraine.

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