(NEW DELHI) – Discounts on Russian Urals crude oil sold to India have shrunk to just $1 to $2 per barrel against the Brent benchmark this week, a sharp shift from early July when cargoes were trading at discounts of more than $10 per barrel, three trade sources told Reuters.
The collapse of the discount reflects renewed fears over supply security from the Middle East, which have driven Indian refiners to lock in Russian barrels despite tightening prices. In early July, a surplus of Middle Eastern crude and weak demand from China had pushed Urals discounts into double digits. That dynamic has now reversed.
China and India remain the largest buyers of Russian oil, which was rerouted from Europe to Asian markets after Western sanctions were imposed in response to Russia’s full scale invasion of Ukraine. The sanctions have reshaped global crude flows, with Moscow offering steep discounts to keep its oil moving.
Indian refiners have stepped up purchases of Russian crude amid fresh concerns about the reliability of Middle Eastern supply. The concerns follow renewed United States military action against Iran and further disruptions to tanker traffic through the Strait of Hormuz, the narrow waterway through which a significant share of global oil passes.
“Indian refineries are purchasing large volumes of Russian oil this year because it has established itself as a stable feedstock,” one source said. The same source added that prices remain highly volatile because of geopolitical tensions affecting global markets.
Chinese refineries also increased purchases of Russian oil this week, trade data and market participants indicated, against a backdrop of disrupted shipments from the Middle East. India’s crude imports from Russia and Latin America surged in the second quarter, while Middle Eastern imports fell due to supply restrictions through the Strait of Hormuz.
Russian oil continues to hold a significant share of Indian imports, supported by competitive pricing and supply consistency despite occasional market swings and logistical difficulties.
Crude oil prices jumped by more than $3 per barrel this week following joint strikes by the United States and Saudi Arabia on targets inside Iraq, as well as the interception of ballistic missiles launched by Iran towards American military positions in the Middle East.