fuel-prices-img Country: UAE

Prices are shown in AED

Oil and Gas

Indian Banks Concerned as Russian Crude Oil Prices Surge

Otis De Marie • July 18, 2023
fuel-prices-img

In an intriguing development catalyzed by OPEC and its allies’ quest to bolster oil prices, the cost of Russian crude oil has surged—much to the chagrin of Indian banks. According to the reports, the major financial institutions are concerned that their shipments may breach the ceiling of $60 per barrel.

Bloomberg has cited an unnamed refinery executive who is familiar with the company’s financing procedures for its oil acquisitions in Russia. This person revealed that two of the most prestigious public sector banks in India, namely the State Bank of India and the Bank of Baroda, have informed Indian refiners that they are unable to facilitate payments for oil that is in excess of the limit.

In addition, the nation’s financial institutions are increasing the level of scrutiny that they apply to the prices at loading ports before factoring in the additional costs that are associated with shipping and logistics. After being approached by Bloomberg, representatives from both the State Bank of India and the Bank of Baroda chose to maintain their silence regarding the matter.

As a direct result of Russia’s invasion of Ukraine, most of the primary buyers worldwide have largely shunned the country’s crude oil. India and China, on the other hand, stand out as particularly notable exceptions. Russia has been catapulted to the top spot as the principal supplier as a result of India taking advantage of the drop in oil prices and purchasing unprecedented volumes. This has allowed Russia to surpass both Iraq and Saudi Arabia as the primary supplier.

While logistics and other costs are taken into account for Indian oil imports from Russia, banks are insisting on obtaining information about the free-on-board prices to ensure that the prices remain at or below the $60 per barrel mark.

This price range provides immunity from the sanctions imposed by the European Union, which prohibit the use of shipping, banking, and insurance services provided by member nations. Immunity is offered in exchange for payment of this price range.

In spite of these sanctions, Russia is still capable of transporting and selling oil at any price, provided that it does not depend on the services and vessels that the G7 and EU offer. Having said that, this proviso does restrict the choices they have.

The sudden disclosure that OPEC and its allies would cut production, which was made earlier this month, was the catalyst for a remarkable rise in the price of oil around the world. After the declaration, Brent, which serves as the global benchmark, saw its price increase by as much as 8 percent, and it has been on a consistent upward trajectory ever since, passing the $87 per barrel threshold on Thursday of last week.

In spite of the fact that Russian crude typically trades at a discount to Brent, an increase in the price of the benchmark that could push it above $95 per barrel could push the cost of oil produced by OPEC and other countries beyond the limit. This recent spike in oil prices may make securing long-term supply agreements with Russian suppliers more difficult.

Indian Oil Corp., the country’s largest and most important state-owned refiner, has recently and successfully signed a contract with Rosneft PJSC. On the other hand, other, less prominent processors are having difficulty renegotiating new terms for their contracts.

According to a report by Bloomberg, Serena Huang, an analyst at Vortexa Ltd., suggested that if crude trades above the cap, it could result in fewer tankers being willing to transport shipments, which would consequently restrict the flow of Russian oil to India. Huang was quoted in the report.

Furthermore, Huang contends that a reduction in the fleet could lead to an increase in freight costs, which would make the economics of oil trade less appealing.

0 0 votes
Article Rating
guest
0 Comments
Inline Feedbacks
View all comments

Will the current Israel–Hamas war cause an increase in fuel prices ?

Total votes: 1

  • 100%

  • 0%

  • 0%

Subscribe to our newsletter

Sign up for our newsletter to receive real-time fuel price updates, money-saving tips, eco-friendly insights, industry news, and exclusive offers. Stay informed, make smart decisions, and save money on your fuel expenses! Join now and take control of your fuel costs!

Chose countries for which fuel prices you want to recieve updates.

By signing up, you agree to FuelPrice.Me's Privacy Policy.

We use cookies to provide and improve our services. By using our site, you consent to cookies.