By Tsvetana Paraskova of OilPrice.com
Dozens of small trading players and middlemen have recently dropped out of trading Russian crude oil to India, as Russia’s interest rates and costs to fund trades have soared, Reuters reported exclusively on Thursday, quoting trade sources and customs and shipping data.
India, one of Russia’s top two markets to sell its oil banned in the West, now relies on Russian crude for a large part of its consumption. Since 2022, after the Russian invasion of Ukraine and the Western sanctions on Moscow, Russia has become India’s single biggest supplier of crude.
Back in 2022 and in 2023, many traders raced to deliver Russian crude to India, lured by the lucrative profits of the trades as risks were higher.
Little-known and newly-incorporated trading companies have handled large volumes of Russian crude oil and products since the Russian invasion of Ukraine and the withdrawal of Western firms from trades with Russia’s oil.
These new oil trading companies that have mushroomed are incorporated in jurisdictions outside of Europe and are often notoriously opaque in their management and dealings.
However, Russia has recently raised its benchmark interest rate to 21%. That’s the highest in two decades and is, of course, affecting funding costs for traders who depend on Russian banks to finance trades with Russian oil, as Western banks are not funding any.
Since the funding costs spiked earlier this year, many middlemen have dropped out of the trades with India, leaving the business to several trading houses.
Currently, the majority of Russian crude volumes are being handled by Litasco Middle East, the Dubai-based trading arm of Russia’s Lukoil, as well as Dubai-based firms Hinera Trading and Black Pearl Energy Trading, per customs and shipping data that Reuters has seen.
India’s demand for Russian crude, which is cheaper than alternatives due to the sanctions, has been so high recently that the discounts at which Russia’s oil is selling to India have narrowed. As a result, private Indian refiners, including Reliance Industries and Rosneft-controlled Nayara Energy, cut their imports of Russian crude by 18% in November compared to October, the New Indian Express reported this week, citing data from energy commodity tracking firm Vortexa.