What a cut in Reliance’s Russian crude purchases would mean for India

Reliance Industries, India’s largest private oil refinery reportedly Following the US decision to impose sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, it stopped purchasing Russian crude oil.

Reliance has become a major buyer of Russian crude oil. In September, India purchased around 629,590 barrels of Russian crude oil per day from two companies, out of its total daily imports of 1.6 million barrels, according to data from commodity data analytics firm Kpler.

In the same month last year, Reliance had purchased around 428,000 barrels of oil per day from Russian companies.

In fact, India’s Russian crude imports account for less than 3% of the total crude import basket, but today account for one-third of India’s crude imports, experts say.

Reliance did not respond to CNBC’s requests for comment on reports that it had halted purchases of Russian crude.

It comes with the tax levied by the US Treasury Department on Wednesday sanctions on Rosneft and Lukoil, citing Moscow’s “serious lack of commitment” to ending the war in Ukraine. The US department said the sanctions were aimed at “disrupting” the Kremlin’s ability to finance its war, signaling that more measures could be coming.

‘There will be negative impacts’ if Reliance stops purchases from Russia [Reliance’s] Margin and profitability as Russian crude oil accounts for more than 50% of total revenue [its] Crude diet,” Pankaj Srivastava, vice president of commodity oil markets at market research firm Rystad Energy, said in emailed comments.

He added that “the availability of similar crude oil is not an issue” and could be sourced from West Asia, Brazil or Guyana, but it is unlikely to get the same price as Russian crude as Reliance has long-term agreements with suppliers such as Rosneft.

Last December, Reliance Industries signed a deal to import crude oil worth $12 billion to $13 billion a year from Russia’s Rosneft for 10 years; This means approximately 500,000 barrels per day. Reuters.

Vandana Hari of Vanda Insights said the purchase of Russian oil by Indian refiners was an “opportunistic purchase” driven by discounts compared to comparable grades.

India bought 38% of Russia’s crude oil exports in September, second only to China with 47%, according to the Helsinki-based think tank Center for Energy and Clean Air.

Hari added that Indian refiners could easily turn to sourcing due to “pressure on refining margins”.

Muyu Xu, senior crude oil analyst at Kpler, said the Indian refining giant may face some short-term problems as it tries to replace Russian crude.

“Given the large volumes under the Reliance-Rosneft agreement, we expect Reliance to experience some short-term disputes over the supply of spare barrels,” says Muyu Xu, senior crude oil analyst at Kpler.

“Russia’s medium-sour Urals remains around $5-6 per barrel,” he added. [barrel] It is cheaper than similar quality Middle Eastern crude oil.

A report by Jefferies last month said the impact of Reliance Industries’ shift away from Russian oil was “manageable”.

The brokerage firm said in September it had received questions from investors about the potential financial impact on Reliance if it halted imports of Russian oil due to sanctions.

The benefit from Russian crude oil accounts for about 2.1% of the firm’s estimated 2.05 trillion rupees ($22.8 billion) consolidated EBITDA for fiscal 2027, the brokerage said.

Reliance’s six-month fiscal 2026 consolidated EBITDA was 1.08 trillion Indian rupees ($12.3 billion); of this, 295 billion rupees came from the oil-chemical segment, while telecommunications and retail ventures together contributed around 500 billion rupees.

Other Indian refineries are also looking Cutting oil imports from Russia. Giving up Russian oil could increase India’s import bill, but there won’t be ‘that big of a sticker shock’ [it] “This would have been possible if crude oil was in the $70 or $80 range,” said Hari of Vanda Insights.