Traders offer March-delivery Russian oil to India at narrower discounts, sources say

By Nidhi Verma

NEW DELHI (Reuters) - Traders have resumed offers of Russian crude cargoes to Indian refiners at narrower discounts after a delay triggered by recently imposed U.S. sanctions that have pushed up trading costs, Indian refining sources said on Friday.

Washington earlier this month imposed sweeping sanctions targeting Russian producers and tankers, disrupting supply from the world's No. 2 producer and tightening ship availability.

India became the largest market for Russian sea-borne oil sold at a discount after Western nations stopped purchasing it in response to Russia's invasion of Ukraine in 2022.

While Russian crude are typically offered during middle of the month two months prior to the period of delivery, new trading entities started showing cargoes for March delivery only this week, the sources said.

There are also fewer cargoes on offer while discounts for Russian flagship Urals crude grade have narrowed compared with last year as freight rates have risen after Moscow sought vessels to replaced sanctioned ones, they added.

The discounts on Russian flagship Urals grade for March delivery have narrowed to between $2.50 and $3 per barrel to Dubai compared with deals at about $3.50 concluded in December for volumes delivered in January and February, one of the sources said.

Freight rates for Russian oil shipments from its Baltic ports rose to above $6 million to India compared with $4.9 million before Jan. 10 when U.S. sanctions were announced, traders said.

Freight rates for ESPO Blend oil shipments to India rose thrice that of early January.

"Whenever new sanction comes it takes some time for the oil and gas industry to stabilise," said Anuj Jain, head of finance at Indian Oil Corp, at an analyst call earlier this week.

He said Russian crude comes in smaller vessel compare with middle eastern crude that is supplied in bigger vessels.

"So the freight advantage sometimes overweigh my other discounts," Jain said adding his company will buy Russian oil only if available at reasonable discount.

India's oil secretary Pankaj Jain last week said that sanctioned tankers loaded with Russian oil have to discharge by Feb. 27.

Indian refiners buy Russian oil on delivered basis with seller arranging for tankers, insurers and other services for oil supplies.

To avoid any secondary sanctions, Indian refiners are seeking Russian supplies involving tankers, insurers and entities that are not sanctioned.

Since the Jan. 10 sanctions, one of the buyers said he is asking for more documents such as a certificate of origin to show that the transactions are above board.

The source also said banks are settling the payment for Russian oil.

India recently expanded the pool of Russian insurers, a move that helps the sellers to switch away from sanctioned insurers Alfastrakhovanie and Ingosstrakh.

(Reporting by Nidhi Verma; additional reporting by Reuters; Editing by Florence Tan and David Evans)