Term deal for Russian crude oil on cards

Govt may secure deal by FY26; decision spurred by falling prices and Rosneft's focus on India

- SUBHAYAN CHAKRABORTY

The government plans to strengthen ongoing efforts to secure a term deal for crude oil purchase from Russia by the next financial year, petroleum ministry sources said.

Russian state oil firm Rosneft's recent deal to supply record volumes of crude oil to Reliance Industries (RIL) shows the time is right to strike a major deal with the country, they added.

A joint front of state-owned refiners are discussing crude oil purchase from Russia under a term deal, and will be asked to step up talks, sources said.

Crude oil from Russia is usually purchased on spot prices, while long-term contracts are usually reserved for crude from India's traditional import sources in West Asia. Spot purchase allows refineries to secure different grades of oil, otherwise unavailable.

"Oil prices have been on a downward trajectory for the past 6 months despite repeated bouts of major strife in West Asia. Globally, estimates of demand growth are being revised downwards. But India remains the only major economy where demand is forecast to be stable and growing. These factors have strengthened the hand of Indian (crude oil) buyers in any of the ongoing negotiations," a source said.

Brent crude prices reduced 9.3 per cent in the last 6 months to $73.95 per barrel, and crossed the $80 per barrel level only once in the last 4 months.