Russian Oil Discounts Surge, Testing US-India Deal

Deeper Discounts on Russian Urals Crude

Discounts on Russian oil for Indian refiners have widened significantly in the last ten days, posing a direct challenge to a recent trade understanding with the United States aimed at curbing these purchases.

Traders familiar with the transactions report that Russia's flagship Urals grade is now being offered at a discount of more than $10 per barrel below Brent crude. This price includes shipping and other associated costs.

According to market intelligence firm Argus, the current discount is around $11 a barrel. This marks a notable increase from the $9.15 figure recorded as recently as January 22. The current markdown is also at least three times higher than the levels quoted before the U.S. sanctioned Russian energy giants Rosneft PJSC and Lukoil PJSC in October. The final discount can vary based on payment conditions.

A US Trade Pact Creates Uncertainty

The growing price incentive from Russia coincides with new geopolitical pressure from Washington. President Donald Trump announced on Monday that the U.S. would lower import tariffs on Indian products. In exchange, India is expected to stop purchasing Russian oil.

While Prime Minister Narendra Modi acknowledged the agreement, he did not provide specific details, leaving the status of crude oil imports ambiguous. This lack of clarity has caused Indian refiners to pause their Russian oil purchases as they seek guidance from New Delhi.

India's Role as a Key Russian Oil Buyer

India emerged as a major customer for Russian crude following the invasion of Ukraine in early 2022, drawn by the substantial discounts. While not traditionally a top buyer, India's imports surged, peaking at 2 million barrels per day.

Purchases have moderated in recent months but remained strong. According to data from Kpler, India imported an average of 1.2 million barrels per day in January.

What's Next for India's Oil Imports?

Despite the political pressure, market analysts believe India's demand for Russian crude will persist. In a note on Tuesday, Kpler stated that India is "unlikely to fully disengage" from Russian oil in the near future.

The data intelligence firm projects that India's imports will hold steady in the range of 1.1 million to 1.3 million barrels per day through the first quarter and into the beginning of the second. Kpler estimates the current Urals discount to India at approximately $9 per barrel against ICE Brent, making it about $4 to $5 per barrel cheaper than comparable Venezuelan crude.