Russia and India Embrace Dubai Benchmark for Oil Partnership
Russia's largest oil producer and India's top refiner forge a new deal using Dubai oil price benchmark, further distancing from Europe-dominated Brent benchmark.
In a strategic move, Russia's largest oil producer Rosneft and India's top refiner Indian Oil Corp have agreed to use the Asia-focused Dubai oil price benchmark in their latest deal to deliver Russian oil to India, according to three sources familiar with the matter. This decision by the two state-controlled companies signifies a shift of Russia's oil sales towards Asia, as Europe has shunned Russian oil following Russia's invasion of Ukraine more than a year ago.
Both Brent and Dubai benchmarks are denominated in dollars and set by S&P Platts. However, Brent is predominantly used by European oil majors and traders, while Dubai is more heavily influenced by Asian and Middle Eastern oil trading. Under the new deal announced on March 29, Rosneft will nearly double oil sales to Indian Oil Corp, with potential sales of up to 11 million barrels per month in the new fiscal year starting April 1. The oil will be sold on Dubai benchmark quotes and discounted to around $8-$10 per barrel.
This strategic partnership offers several advantages for India:
- Diversification of oil suppliers: The increased oil imports from Russia help India diversify its energy sources, improving energy security and reducing vulnerability to geopolitical risks or supply disruptions.
- Strengthening bilateral ties: The closer collaboration in the energy sector highlights the strengthening relationship between India and Russia, with potential increased cooperation in other areas such as trade, defense, and technology.
- Cost savings: The discounted pricing of Russian oil can lead to cost savings for India, helping to manage inflation and reduce the overall burden on the country's economy.
- Enhanced bargaining power: As the largest buyer of seaborne crude from Russia, India gains a stronger position in negotiating future oil contracts and securing favorable terms.
- Support for domestic refineries: The new deal ensures a stable supply of Russian oil for Indian refineries, leading to increased efficiency and productivity in the domestic refining sector.
In conclusion, the collaboration between India's top refiner and Russia's largest oil producer, along with the shift to the Dubai oil price benchmark, contributes positively to India's energy security, economy, and bilateral relations.