Indian Refiners Pay Steep Premiums as Russian Discounts Vanish
Rising spot prices and the erosion of Russian crude discounts are forcing India's state refiners to chase scarce barrels at costs climbing faster than global benchmarks.
Indian state refiners are paying sharply higher premiums for physical crude than just weeks ago, with prices for actual barrels running above $93 a barrel and procurement costs rising faster than global benchmarks, the Times of India reported on Tuesday (2026-08-18). Russian crude, which had been India's discounted supply of choice, now offers little financial advantage.5,6
India imports more than 85% of the oil it consumes. Before the West Asia conflict erupted in late February 2026, roughly half of those barrels came from the Middle East; that sourcing base has been under severe strain since fighting disrupted the Strait of Hormuz.2
The discount on Russian crude has effectively disappeared. Gulf suppliers are demanding higher premiums amid shipping disruptions, making Russian and Venezuelan grades less commercially attractive, Outlook Business reported on Tuesday (2026-08-18). ICE Brent crude front-month was at $93.43 a barrel as of August 20 (2026-08-20), having risen roughly $10 in the two weeks to August 18 (2026-08-18), a sharp reversal from a selloff earlier in the month.6
That selloff needs context. ICE Brent had dropped to near $80 a barrel in the week of August 3 (2026-08-03), a 20% fall from prior levels, on market expectations of an imminent deal to reopen Hormuz shipping lanes, according to Rigzone reporting on Saudi Aramco's quarterly earnings. Those expectations did not materialise, and physical supply has tightened again since.3
MRPL and Hindustan Petroleum Corporation have gone to the spot market for a combined 6 million barrels, Reuters reported on Wednesday (2026-08-12), citing tender documents it had seen. HPCL alone is seeking up to 4 million barrels for September and October delivery, a measure of how thoroughly term supply from Gulf producers has been disrupted.4
Prices paid in recent tenders show the scale of the cost shift. MRPL purchased approximately 1 million barrels of Omani crude in the week of August 3 (2026-08-03) at a premium of around $3 a barrel over Dated Brent, sourced from Mitsui & Co Energy Trading Singapore.4
Indian Oil Corporation, India's largest refiner by capacity, bought 4 million barrels of West African crude from Chevron, including Nemba, Saxi Batuque and Clov grades from Angola and Congo's Djeno crude. American, Brazilian and Guyanese barrels are also in the sourcing mix, Outlook Business reported, but those grades are not available in unlimited quantities either.4,6
Saudi Aramco is trying to compensate through Red Sea terminals. Chief Executive Amin Nasser told analysts on Tuesday (2026-08-04) that the company had sustained exports at roughly 5 million barrels a day, about 70% of its normal shipment level. Saudi Arabia is targeting more than 5 million barrels per day through those alternative routes, with existing Red Sea infrastructure rated at that capacity, India Seatrade News reported.1,3
Yet Aramco also cut its official selling price for Arab Light for September deliveries. OSP cuts and rising procurement premiums are not contradictory — Saudi Arabia is competing on benchmark pricing while physical spot tightness drives up what Indian refiners actually pay in practice.3,6
Russian crude is still arriving in India near record levels. Kpler data cited by OilPrice.com put flows at roughly 2.45 million barrels per day in July 2026. But the discount to Brent that made those barrels commercially compelling has contracted sharply. The US Senate has passed legislation proposing tariffs of up to 100% on India, China and other buyers of Russian oil, adding a policy dimension to a trade that was already under pressure; enforcement timelines remain unclear.2,5,6
Aramco's Nasser estimated the cumulative global shortfall from the Hormuz disruption at close to 1 billion barrels since late February 2026. Industry estimates cited by India Seatrade News put every week of closure at nearly 100 million barrels of removed supply. Both figures come from interested parties. But the premiums India's state refiners are paying in spot tenders provide their own corroboration. HPCL's tender for up to 4 million barrels for September and October delivery, issued on Wednesday (2026-08-12), will show whether supply at replacement volumes is available at any manageable cost.1,4