US, Venezuelan Crude Costlier, Less Suitable For Indian Refiners
The WTI crude is light, sweet and low in sulphur and is the easiest to refine, but is costlier
Chennai: While the government has reportedly asked refiners to consider oil purchase from the US and Venezuela, these crude varieties are more expensive and less compatible for large refining volumes compared to Russian crude.
According to a Bloomberg report, India has urged its state-run oil refiners to evaluate the possibilities of importing crude oil from the US and Venezuela. This comes after the government, as per the interim framework of the trade deal, has committed to stop Russian crude imports.
However, US and Venezuelan crude are costlier than Russian crude. The US WTI crude, when delivered in India is almost in parity with ICE Brent. Russian Urals crude comes at a discount of $9/bbl to ICE Brent, whereas Venezuelan crude is just $4-5/bbl cheaper than ICE Brent. Among all these, Russian crude is the cheapest, according to Kpler.
The WTI crude is light, sweet and low in sulphur and is the easiest to refine, but is costlier. Russian urals are medium sour with moderate sulphur and can be refined by most of the complex refineries. However, Venezuelan crude is heavy with high sulphur content and can only be refined by highly complex refineries equipped with cokers and hydrocrackers.
Indian refiners are mostly configured for medium crude and there are capacity constraints for processing light and heavy grades.
“Venezuelan crude could re-emerge as a supply source for some Indian refiners, given its compatibility with India’s complex refining systems. However, any volumes are likely to remain episodic, constrained by current processing economics, as discounts are less attractive compared with levels previously available to refiners, alongside ongoing considerations around sanctions compliance, insurance, and blending requirements,” finds Kpler.
Hence, Venezuelan crude cannot be a sustained and structural replacement to Russian crude. In January, Indian imports of Russian crude remained around 1.1–1.3 million barrels per day and it was still the largest purchase in the crude basket.
US crude imports into India have remained strong in recent months and are expected to stay supported following the deal. US barrels could account for up to 10 per cent of India’s crude intake, largely displacing lighter West African grades rather than Russian crude, finds Kpler.
