Bharat Petroleum Corp expects to buy much less Russian crude in November. Russian cargoes were "significantly reduced" for November because of higher freight costs, BPCL's head of finance Vetsa Ramakrishna Gupta told analysts on 26 October, after the company reported September-quarter earnings1.
Russian crude was about 37% of BPCL's crude sourcing mix in the July to September quarter1. Gupta said Middle East grades are now more commercially viable than Russian ones, and BPCL expects higher volumes from the region in October and November1.
The discount that freight took away
On paper, Russian crude still looks cheap. Urals loading at Russian ports fell to around $80 a barrel in the week to 21 October4. Spot Brent was $115.22 on 20 October5. That discount does not survive the voyage. Urals differentials in India weakened to near parity with dated Brent, Reuters monitoring and LSEG data show4. Tanker availability is thin, and war risk in the Black and Red Seas makes shipping very expensive4.
BPCL said premiums for Russian crude narrowed to about $1 to $2 a barrel for December cargoes, from $12 to $13 a barrel in October1.
Gulf freight is no bargain either. The International Energy Agency said moving crude from the Middle East Gulf to Asia cost more than $37 a barrel by mid-October, over five times pre-war levels3. A two million barrel VLCC cargo carried more than $74 million of freight, against less than $15 million before the conflict3.
The Gulf still wins on the total bill. Its voyage to India is shorter, and producers are sharing the cost. Some now sell on a delivered basis and absorb part of the freight, and Indian refiners including IOC have bought Iraqi crude at a discount to Dubai on a free on board basis6.
| Measure | Reading |
|---|---|
| Russian premium, October to December cargoes | $12 to $13, then $1 to $2 a barrel1 |
| Russian crude into India, September | 1.8 million barrels a day, 33.5% of imports2 |
| VLCC, Persian Gulf to West Coast India | $95.83 a tonne on 19 October against $19.15 on 27 February7 |
| India's crude basket, October average | $121.25 a barrel, against $65.08 a year earlier8 |
One refiner, not the whole market
India was already moving back to the Gulf before BPCL spoke. Middle East crude was about 54% of India's September imports, up from 32% in August2. Russian crude fell about 14% month on month to roughly 1.8 million barrels a day, or 33.5% of the total2. Ship-tracking estimates differ: S&P Global Commodities at Sea put Russian discharges into India at 1.64 million barrels a day in September9.
BPCL's July to September Russian share of 37% was above India's September share of 33.5%1, 2. There is no public confirmation that other refiners have cut November Russian purchases. Reliance Industries took about a third of Jamnagar's feedstock from Russia in July to September10. Kpler analyst Sumit Ritolia said US engagement with Reliance alone was unlikely to pull the refiner away from Russian crude quickly10.
IOC is moving the other way on long-term Gulf contracts. It plans a slight cut in the crude it buys from Middle Eastern producers under annual deals in 2027/28, a source said6. The US waiver for buyers of Russian oil is also only a pause, which points to Russian barrels staying in the mix9.
Maintenance lands in a tight product market
BPCL also warned that refinery runs may moderate in the third and fourth quarters. It plans a 30-day shutdown of some units at Mumbai refinery and a 30 to 40 day maintenance turnaround at some units at Kochi1. Mumbai can process 13 million tonnes a year and Kochi 15.5 million tonnes, according to Wikipedia11.
Maintenance and the Russian cut pull in the same direction: fewer runs need fewer cargoes of every grade1.
BusinessLine reported that product exports were on a record streak in July to September12. Kpler said Indian refineries ran above 100% utilisation with limited maintenance, which helped throughput12. Industry sources expect product exports to fall in October to December, while Kpler says rising domestic diesel demand could limit export volumes12.
Europe's benchmark diesel crack rose above $74 a barrel on 16 October13. About 45% of Russian primary refining capacity was offline at the end of September13.
What buyers pay now
India's crude basket averaged $121.25 a barrel in October so far, against $65.08 a year earlier, PPAC data show8. The Economic Times, citing a Times of India report, said October crude averaged about $120 a barrel, the highest in twelve years, with state retailers selling petrol and diesel at a loss14.
Retail prices have moved little. Kpler's Ritolia said India's retail diesel prices have remained largely unchanged despite higher global prices12. The government has used duty cuts and allowed some increases, but has limited room for more relief because fuel and fertiliser subsidies are already above last year, the ET report said14.