The battle of supremacy between Russia and OPEC ally Saudi Arabia doesn’t seem to be slowing down, especially with Russia continually undercutting the price of its crude oil to India. Moscow believes the move will increase its market share in India, one of the largest importers of crude oil. As a result of this move, tough competition is brewing in India between two of the world’s largest crude oil exporters.
Reports suggest that between April and June, Russian barrels were cheaper than their Saudi counterparts, with the difference in price rising to nearly $19 per barrel in May. With this move, Russia has now leapfrogged Saudi Arabia to become the second largest supplier of crude oil to India, closely trailing Iraq.
While many countries stopped buying Russian oil following the Kremlin’s invasion of Ukraine in February, India and China have continued to patronize Russian oil. Though India imports nearly 85% of its oil from overseas, buying at a discounted rate from Russia has provided some economic relief, especially with the country struggling with a record trade deficit and high inflation.
The big picture
According to government reports, India’s cost of importing petroleum products skyrocketed to $4.75 billion in the second quarter. This sharp increase in cost has been attributed to rising world prices and a gasoline consumption recovery. On the flip slide, the country has made $25.1 billion in sales in the same period.
While the difference between Saudi and Russian oil has dwindled in June, Russian crude oil is still $13 cheaper than Saudi crude. Before its invasion of Ukraine, Russia ranked as the tenth largest supplier of crude oil to India, with Saudi comfortably taking the second position. But things have now changed, with Russia gliding to the second position after lowering its price.
Since June this year, Iraq has held its spot as India’s largest crude supplier. Even though its crude oil was $9 more expensive than Russia’s barrels, the price of its barrels for other months was lower. Since March, India has taken advantage of cheap Russian crude, increasing its demand by tenfold.