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Iraq reaches out to Indian refiners to discuss crude oil discounts

Focus on buying Russian crude has led to a decline in imports from West Asia

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Photo: Bloomberg
Subhayan Chakraborty New Delhi
4 min read Last Updated : Mar 09 2023 | 11:23 PM IST
With 33 per cent of India’s oil import consistently coming from Russia, Iraq has reached out to refiners here with offers to open discussions on what level of discounts would be needed to lure them back, several people in the know said.

Multiple officials and industry executives said Iraq, wants to discuss discounts expected by Indian refiners. Iraq was the largest source of crude oil for India in the first 10 months of the current fiscal year. But imports from Russia are gaining fast and may catch up with Iraq by FY23 end, experts said.

India’s focus on snapping up ever higher volumes of Russian crude oil has led to a proportionate decline in import from West Asia. Flows from Iraq, Saudi Arabia, and the UAE have suffered.

“Iraq has communicated to Indian refiners its willingness to explore a further cut in the prices of crude oil it offers. It has sought discussions to better plan flows at a time when the Indian uptake has become volatile,” a top industry executive with a public-sector oil refiner said.

The government is aware of this, he added.

Officials said while no bilateral discussions on the issue were expected, the latest move was not unexpected.

“At a time when Moscow’s relations with the West continue to sour, and deep discounts for crude oil become the norm rather than the exception, Iraq is being proactive in stopping a further slide in its share of the Indian crude oil basket,” an official said.



Tug of war

Baghdad last year had undercut Russia from June by supplying a range of crude oils that on average cost $9 a barrel less than the Russian variety. The extremely price-sensitive market, therefore, had shifted heavily back in favour of Iraq.

This had continued till the G7 nations had imposed a $60 per barrel price cap on Russian crude oil on December 5, 2022. This was implemented concurrently with a separate ban on Russian seaborne crude oil shipments by European Union nations.

“Pushed into a corner, Moscow had offered more competitive prices since then to retain a steady flow of crude oil to new buyers like India and China to make up for the lost volumes which were earlier going to Europe. That trend continues till February,” a senior industry executive said.

Even without the price argument, officials say a stable supply of crude oil should be established from outside the West Asian region.

“While oil imports from Iraq have remained the mainstay of our purchases, given global complications and Iraq’s volatile internal situation, India needs alternative mechanisms,” another official said.

The series of Basrah crude oil export grades from Iraq are attractive for upgraded Indian refineries. They are also of great value for producing items such as diesel. As part of a long-planned overhaul of its crude oil grades, Iraq has over the past year increased the availability of Basrah Medium and Basrah Heavy —cheaper than Basrah Light — that are suited for India’s upgraded plants.

Russia gaining fast

On the other hand, import from Russia again firmed up in recent months. It remained the single-largest supplier of crude oil for a fifth straight month as of February, show estimates made by London-based commodity data analytics provider Vortexa, which tracks ship movements to estimate imports.

According to Vortexa, India imported 1.6 million barrels per day (bpd) from Russia in February -- an all-time high-- up from 1.4 million bpd in January and 1 million bpd in December.

Meanwhile, Iraqi oil import fell slightly to 939,921 bpd in February. It had risen in January to a seven-month high of 983,000 bpd, up from 803,228 bpd in December.


Officials have reiterated the position that as long as Russia continues to compete with other major producers in offering discounts, India will continue to source from it. The same applies to Iraq, they said.


Topics :Oil importsRussiaRussia Oil productionOil Prices

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