India Seeks Cheaper Oil Supplies as Costs Soar Amid U.S. Sanctions on Russia

India's largest state-owned refiners—Indian Oil Corporation, Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Ltd (BPCL)—are negotiating with Middle Eastern exporters for alternative price quotes as they struggle to manage skyrocketing oil and shipping prices. These price hikes follow the U.S. sanctions on Russian oil trade, which have resulted in soaring tanker rates and a four-month high in global oil prices.

To mitigate the rising costs, Indian refiners have asked Abu Dhabi National Oil Company (ADNOC) to provide pricing on a delivered-at-port (DAP) basis, in addition to the standard free-on-board (FOB) basis, which is the current practice for Middle Eastern crude exports. Under the DAP model, the seller bears the costs of shipping, insurance, and other logistical services, offering a potential cost-saving alternative amid surging shipping rates.

India imports more than 80% of its crude oil, and with Russian crude, previously an affordable source, now being subject to U.S. sanctions, Indian refiners are exploring alternatives from the Middle East. The sanctions, which have resulted in the loss of cheaper Russian crude supplies, have forced Indian refiners to look for more affordable options, especially as tanker rates have doubled in the last week alone. These rising shipping costs are adding an additional financial burden to oil imports, pushing refiners to explore new pricing structures.

While ADNOC and other Middle Eastern producers have rarely sold crude on a DAP basis, Indian refiners hope that this pricing model could offer better rates, especially given the increasing freight costs. The refiners are also planning to approach other oil giants, such as Saudi Aramco, to request price quotes on similar terms.

India’s dependence on Russian oil has grown substantially since the Russian invasion of Ukraine, making Russia the country’s largest oil supplier. However, with the new U.S. sanctions, Indian refiners are adjusting their strategies to ensure a steady supply of crude at the most cost-effective prices.

In the broader energy landscape, U.S. President Donald Trump has also urged the European Union to increase its purchases of U.S. oil and liquefied natural gas (LNG) to avoid potential tariffs on all imports. As the U.S. continues to emerge as the world’s largest LNG exporter, it has become a key supplier to Europe, especially after the suspension of Russian pipeline gas flows. However, Europe’s reliance on long-term LNG contracts has made it difficult to take advantage of spot market opportunities, leaving the EU in a challenging position.