What a lower in Reliance’s Russian crude purchases would imply for India

India’s largest personal oil refiner Reliance Industries is reportedly halting purchases of Russian crude, following the U.S.’ determination to sanction Russia’s two largest oil firms, Rosneft and Lukoil.

Reliance has turn into a significant purchaser of Russian crude. In September, it bought round 629,590 barrels of Russian crude per day from the 2 corporations, out of India’s whole imports of 1.6 million barrels per day, in response to information by commodities information analytics agency Kpler.

Over the identical month final yr, Reliance bought round 428,000 barrels per day of oil from the Russian firms.

In actual fact, India’s Russian crude imports used to account for lower than 3% of its whole crude import basket, however at this time account for one-third of India’s crude imports, specialists say.

Reliance has not responded to CNBC requests for touch upon stories that it’s stopping the acquisition of Russian crude.

It comes because the U.S. Treasury Division on Wednesday levied sanctions on Rosneft and Lukoil, citing Moscow’s “lack of significant dedication” to ending the warfare in Ukraine. The sanctions purpose to “degrade” the Kremlin’s potential to finance its warfare, the U.S. division stated, signaling extra measures may observe.

If Reliance does halt Russian purchases, it’s going to have “unfavourable impacts on [Reliance’s] margin and profitability as Russian crude represent greater than 50% of [its] crude eating regimen,” Pankaj Srivastava, SVP of commodity oil markets at market analysis agency Rystad Vitality stated in emailed feedback.

He added that the supply of “related crude will not be a problem” and may be sourced from West Asia, Brazil, or Guyana, however Reliance is unlikely to get the identical value because it does on Russian crude, because it has long-term offers with suppliers like Rosneft.

Final December, Reliance Industries signed a deal to import crude oil value $12 billion-$13 billion a yr from Russia’s Rosneft for 10 years, which might translate to roughly 500,000 barrels per day, in response to a report by Reuters.

The acquisition of Russian oil by Indian refiners was “opportunistic shopping for” pushed by reductions versus comparable grades, stated Vandana Hari of Vanda Insights.

India purchased 38% of Russia’s crude exports in September, second solely to China at 47% in response to Helsinki-based assume tank Centre for Vitality and Clear Air.

Hari added that Indian refineries can simply pivot to purchasing from sources with the trade-off being “strain on refining margins.”

Muyu Xu, senior crude oil analyst at Kpler, stated the Indian refining large would possibly face some short-term points because it appears to exchange the Russian crude.

“Given the big volumes below the Reliance-Rosneft deal, we anticipate some short-term friction for Reliance in securing substitute barrels,” says Muyu Xu, senior crude oil analyst at Kpler.

She added that “Russia’s medium-sour Urals stays about $5–6/bbl [barrel] cheaper than Center Japanese crude of comparable high quality.

A report by Jefferies final month indicated that the affect of Reliance Industries shifting away from Russian oil was “manageable.”

The brokerage stated in September that it had obtained queries from traders concerning the doable monetary affect on Reliance if it halts its imports of Russian oil attributable to sanctions.

The advantage of Russian crude accounts for round 2.1% of the agency’s estimated consolidated EBITDA of two.05 trillion rupees ($ 22.8 billion) for fiscal yr 2027, the brokerage stated.

Reliance’s consolidated EBITDA for the six months of fiscal yr 2026 was 1.08 trillion Indian rupees ($12.3 billion), of which 295 billion rupees had been from its oil-to-chemicals phase, whereas its telecom and retail ventures collectively contributed to just about 500 billion rupees.

Different Indian refiners are additionally trying to chop imports of Russian oil. Weaning off Russian oil would possibly increase India’s import invoice, however it will not be “as huge a sticker shock as [it] may need been if crude was within the $70 or $80 vary,” stated Hari of Vanda Insights.

U.S. West Texas Intermediate futures had been buying and selling round $61.83 a barrel on Friday.

Consultants additionally say the advantages of India slicing again on Russian oil purchases outweigh the downsides.

In line with Natixis’ Senior Economist Trinh Nguyen, the arbitrage that Russian oil provided throughout the power disaster has tapered off, and there’s no want for India now to have important purchases of Russian oil.

India’s Russian crude buy has been a sore level in its commerce relations with the U.S., which culminated within the U.S. imposing a complete 50% tariff on Indian items exported to the U.S..

With each state-owned and personal refiners anticipated to halt buy of Russian crude — a long-standing demand of U.S. President Donald Trump — the possibilities of India negotiating a mutually helpful commerce cope with the U.S. have elevated.

— CNBC’s Ying Shan Lee contributed to this report