Three trade sources said that the discount on Russian Urals crude delivered to India has?dropped this week to between $1 and 2 a barrel compared to the Brent benchmark dated last year due to supply concerns.

The increased demand for?Indian refined products was linked to?renewed hostilities during the Iran War and disruptions in shipping through the Strait of Hormuz.

The rapid rebound of Russia's flagship grade is a dramatic change from the early part of July when Urals cargoes traded at discounts exceeding $10 per barrel in India. This was due to Middle Eastern surpluses and a weaker interest in buying from China.

China and India are still the largest buyers of Russian crude oil, which was redirected to Asia from Europe after Western sanctions and embargoes in response to Russia’s war in Ukraine.

Sources said that cargoes of Urals oil for delivery in late August or early September have been offered at a discount of $1 to $2 per barrel.

Indian refiners increased their purchases of Russian crude oil after concerns about Middle Eastern supply security were re-emerging following renewed U.S. action against Iran, and new disruptions in tanker traffic across the Strait of Hormuz.

One source stated that Indian refiners bought large volumes of Russian oil in this year, because it was a stable fuel. Prices remained volatile due to the geopolitical tensions on markets.

Due to Middle East oil supply disruptions, Chinese refiners have also turned to Russian oil this week.

According to data from the trade and market participants, India's imports of oil from Latin America and Russia increased in the second quarter. However, imports of oil from the Middle East decreased as the Strait of Hormuz was constrained.

Russian crude continues to account for a significant share of India's oil purchases, thanks to its competitive prices and stable supply despite market disruptions and logistical challenges.

(source: Reuters)