Indian Oil Corporation (IOC), India’s premier refiner, is pivoting to the spot oil market due to the expiration of its annual oil supply agreement with Russia’s Rosneft. Negotiations to renew the contract, originally signed in December 2021 during President Vladimir Putin’s visit to India, have stalled over disagreements on pricing and volume. The deal, crucial for securing 1.5 million metric tons of oil monthly at a significant discount, has not been updated for the 2024-25 period.
As negotiations persist without a resolution, IOC is forced to seek Russian oil through spot market purchases. This shift comes at a time when India, the world’s third-largest oil importer, has increasingly relied on discounted Russian oil, making Russia its top oil supplier following the imposition of Western sanctions due to the Ukraine conflict.
The original agreement offered IOC a substantial discount, but Rosneft’s current terms align closer with spot market prices, offering less incentive for a long-term commitment. Additionally, the volume Rosneft is willing to supply under the new terms is significantly less than what Indian refiners collectively aimed for.
This development reflects broader challenges in global energy trade, exacerbated by sanctions and geopolitical tensions. As IOC navigates these complexities, the Indian market’s reliance on Russian oil remains undiminished, though payment issues for previous purchases pose ongoing challenges.
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