Russian oil tankers position close to India amid lack of clarity on US FTA

Russia may remain India’s largest crude oil supplier, at least for the next few months, as Indian refiners continue to receive substantial volumes in the absence of clarity on the proposed US-India bilateral trade, according to interviews with legal experts, market participants and ship tracking data. Moreover, discounts on higher quality Russian oil are twice as much as readily available dirty Venezuelan oil

“The India-US trade understanding recently announced does not automatically impose a ban or limitation on Indian entities acquiring Russian crude oil,’’ said Shivam Sinha, partner at Delhi-based law firm Sagus Legal. “It signals diplomatic and policy-level understanding between the two countries aiming to expand bilateral commerce, yet such declarations alone generate no enforceable duties capable of curtailing private sector imports.’’

That perhaps explains why India’s biggest refiners have already received six cargoes of Russian oil, including one partial cargo, in February of medium, sour Urals grade, the best value proposition and profit-generating grade for Indian refiners. That compares to 40 cargoes in all of January, including nine partial, and predominantly Urals, according to shipping data accessed by Business Standard on market intelligence agency Kpler.

Suppliers are also optimistic, with over 20 million barrels of Russian oil stored in tankers in the Arabian Sea, Kpler analyst Sumit Ritolia said. That compares to 30 million barrels in January, with the decline reflecting some sales to India and China. Floating storage is also much lower than around 8 million barrels in January 2025, prior to October US sanctions.

Most of the floating storage will eventually end up in India, Ritolia said, predicting over 1.2 million barrels per day (bpd) in Russian oil flows to India in March.

Russian oil supplies averaged 1.35 million bpd in the first four days of February compared to 1.25 million bpd in entire January—though they may not be strictly comparable for now, Kpler data showed.

Senior refining officials told Business Standard that in the absence of clarity from New Delhi on US President Donald Trump’s social media post or in the absence of official communications Russian crudes are being evaluated alongside other grades from Brazil, Angola or UAE.

“The free trade agreement [FTA] wording may sound more restrictive, but the underlying reality will not undermine India’s sovereign energy decisions,’’ said Russell A Stamets, partner at Circle Of Counsels. ''No one can or will bar India from pursuing its energy goals as it wishes.’’

Both Prime Minister Narendra Modi and Commerce and Industry Minister Piyush Goyal have made no mention of any crude oil trades in their statements about the Indo-US FTA, as against US President Donald Trump stating on Truth Social that India will stop buying Russian oil and buy US and Venezuelan oil.

Venezuelan Oil

Despite Trump pitching Venezuelan oil, Indian refiners told Business Standard that the crude grade was not viable at discounts offered by traders Vitol and Trafigura. In the past, Indian customs data showed Venezuelan oil cheaper by over $10 per barrel compared to West Asian or Russian grades. The large discount was because of poor quality — heavy, high sulphur, acidic crude that is tough to process.

But current discounts of Venezuelan oil resales, approved by Washington, are only $5-$6 per barrel, a top trader at a state-run Indian refiner said. “Urals crude is available at over $10 per barrel discounts,’’ he said. Available data also reflects the non-interference of New Delhi in crude sourcing decisions.

Another trader from a state refiner said that New Delhi has neither told them to reduce Russian oil imports nor encouraged them to buy more US crude—for now. Economics dictates purchase decisions, he added. That explains why Indian Oil has imported some of its highest volumes of Russian oil since December, and US exports to India in January and February averaged only 180,000 bpd, a third of October volumes, according to shipping data.

Russian flows

Private sector refiners Reliance Industries, Russian Rosneft-run Nayara Energy and state-run refiner Indian Oil received two cargoes each from Russia in the first four days of February. Cargoes bought by Reliance were shipped in late November, an unusually long voyage of 70 days, nearly thrice the usual time taken for a Russian oil tanker to discharge at an Indian port, according to data from Kpler, indicating the oil was supplied from storage. Reliance’s sellers are not revealed. Reliance was not available for comments.

Indian Oil and Nayara Energy, which is under European Union sanctions, received two each this month, with Redwood Global mentioned as the supplier for Indian Oil and Nayara. Indian Oil’s cargoes were loaded on December 26.