Russian oil discounts have halved to $3-6/barrel from $8-10 in FY24

Softening discount threatens to inflate India’s oil import bill in FY25

Russian crude oil discounts have almost halved to $3-6 per barrel at present, from an average $8-10 during April 2023-March 2024, a development which threatens India’s savings from discounted crude in its import bill during FY25.

For comparison, the world’s third largest crude oil importer saved more than ₹1lakh crore during FY23 and FY24 on its oil import bill due to Russian discounts.

“Discounts depend on consignment to consignment. Generally, we procure on spot basis, two months in advance. Last year, we used to get around $8-10 per barrel. Maybe now it will be around $3-4 or $3-6 per barrel range,” Bharat Petroleum Corporation’s (BPCL) senior management said in an investor call on Friday. Russia now accounts for more than onethird of India’s total imports.

HIGHER IMPORT BILL

According to ICRA, India saved around $5.1 billion in FY23 and $7.9 billion in 11 months of FY24 on its oil import bill due to discounts on oil in FY24, of which Russian cargoes accounted for 13 mt, which is the highest among the PSU OMCs. In FY25, the company expects Russian oil processing to be in the range of “at least” 25 per cent.

“In FY24, BPCL imported around 39 per cent of its total crude oil requirement from Russia. As of date, we foresee getting Russian supplies. But the only thing is that most Russian supplies are on spot basis and not term basis. If there are no new geopolitical tensions, no new issues, we are estimating supplies to continue at similar levels,” the management said.

Going ahead, the Maharatna company remains “cautiously optimistic” and expects crude oil prices to remain in the range of $83-87 per barrel in the near future with geopolitical tensions and supply chain disruptions being potential hurdles.

On higher prices and margin impact, BPCL said, “Earlier also we said that as long as crude oil prices are hovering at $80-85 per barrel, we are comfortable even at these prices. The margins may squeeze for a short period of time, but as long as crude is at $80-85 we can reasonably generate marketing money.”