NEW DELHI: Traders have stopped offering discounts on Russian crude sold to India as disruptions to Middle Eastern supplies have boosted demand for alternative grades, the head of finance at Indian state refiner Bharat Petroleum Corp said on Thursday.
Refiners in India, the world's third-biggest oil importer and consumer, have raised purchases of Russian oil as supplies from traditional producers in the Middle East have been disrupted.
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BPCL has secured crude supplies for August and is scouting for cargoes for September delivery, Vetsa Ramakrishna Gupta told analysts after the company's quarterly earnings.
He said the company is receiving offers from traders on Russian oil cargoes for September delivery.
"But definitely because of recent development in crude markets, now no one is offering any discount for Russian crude," he added. Discounts for Russian Urals crude recently widened to more than $10 a barrel below dated Brent in Indian ports.
"Although markets witnessed a brief period of stability during June, the latest geopolitical development has reminded us how quickly it can reshape the operating landscape," Gupta said, adding that suppliers may not be in a position to supply some cargoes through Red Sea routes.
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The disappearance of discounts follows a jump in global oil prices after Houthi attacks on shipping in the Red Sea and renewed disruptions to flows through the Strait of Hormuz after an escalation in hostilities between the U.S. and Iran, raising costs for refiners reliant on imported crude.
Higher crude costs are likely to squeeze profitability of Indian state refiners, which sell fuels at subsidised rates in their domestic market. BPCL and Hindustan Petroleum Corp both reported quarterly net losses on Wednesday.
BPCL, which processes more than 800,000 barrels per day of crude, met 69% of its oil needs through spot purchases in the June quarter, Gupta said.
