Despite calls, US crude oil remains expensive for India, while Venezuela offers more favorable terms

US Secretary of State Marco Rubio called on India during his visit to India to increase purchases of both American and Venezuelan oil. However, data from government agencies, industry intelligence, and freight information indicate that the availability of US crude supplies for Indian refiners has limitations.

According to Indian government data and industry sources, US crude oil is currently unavailable to Indian refiners, whereas Venezuelan oil holds value primarily for the private company Reliance Industries, provided Washington ensures the supply.

Recent data from Indian customs shows that in August, US crude oil was the most expensive for Indian refiners, and trends remain similar in September and October.

Limitations of American Oil

Senior officials in the refining industry told Business Standard that they have significantly slowed down the purchase of American crude oil in recent months due to record freight rates. Aaron Kudlow, commodities owner from Sparta Commodities, based in the UK, noted that supply volumes from the US are much lower than at the beginning of the year, and the economic situation is extremely unfavorable. He also reported that arbitration for American barrels bound for the Far East remains closed for January shipments.

In August, Indian refiners paid the highest premium of $21 per barrel over the Indian Crude Basket (ICB) for US crude oil deliveries. Premiums were comparable in July, which explains the slowdown in imports of American grades in recent months, despite Washington's calls to increase purchases and the crisis in the Middle East.

Sumit Ritholia, lead analyst at India, Kpler, stated that although US crude oil is part of India's import basket, volumes will largely depend on pricing, the freight economic situation, and the specific needs of refineries. He emphasized that without competitive pricing for American barrels compared to alternative light grades from other regions, the incentive for sustained large-scale imports is limited.

Indian refiners noted that US crude oil, which mainly consists of low-sulfur grades, was the most expensive in August, reaching $111 per barrel delivered, driven by high transportation and insurance costs. During the same period, the average price for Saudi Arabian Arab Light crude was $93 per barrel.

According to a senior trader at a state-owned refinery, freight rates reached astronomical levels after some of the largest VLCC tankers were occupied for months transporting crude from the war zone in West Asia around the Strait of Hormuz. This trader specified that freight now accounts for about 30 percent of the cargo value, compared to less than 5 percent before the February war.

These high transport costs reduced the attractiveness of American oil for Indian refiners. A senior trader in Singapore reported that Indian refiners are willing to charter a VLCC for over $1 million per day, whereas this amount was $50,000–$100,000 in February, but finding vessels remains a difficult task.

Ritholia highlighted two main obstacles to the export of US crude oil to India. The first is the significantly higher freight cost when shipping crude from the US Gulf Coast to India. The second is that most of the US crude available for export is relatively light and sweet, while many Indian refineries are set up to process medium and heavier grades. Higher light distillate yields do not always provide the best economic benefit, especially when refiners aim to maximize medium distillate production.

Oil from Venezuela

In contrast, Venezuelan oil has competitive pricing, but volumes are limited as most of the crude is directed to US refiners and Reliance Industries, according to two state refinery officials. According to Indian government data and industry sources, discounts on Venezuelan grades increased the most since the resumption of oil imports into India in January 2024, nearly five times compared to July.

Customs data showed that in August, Venezuelan crude oil, consisting mainly of heavy Merey grades, entered India with an average discount of $24 per barrel over the ICB on delivery terms, compared to a $5 per barrel discount in July. These discounts persisted in September and October, albeit at a lower level, noted one senior refining official.

R. Ramachandran, an industry consultant and former head of refining at Bharat Petroleum, stated that Reliance is the only Indian refiner consistently processing Venezuelan oil, besides refiners on the US Gulf Coast. He added that Reliance possesses the blending infrastructure and processing capacity to handle Merey, a widely used Venezuelan grade.

Venezuelan crude oil is typically among the heaviest, cheapest, and most difficult to refine grades due to its high sulfur and acidity content. The delivered price of Venezuelan oil, mainly imported by Reliance Industries, was $66 per barrel in August, which was $11 lower than $77 per barrel in July. There were no supplies in August 2025.

Broader discounts and lower prices stimulated an increase in Venezuelan oil imports into India in August. Kpler data showed that 350,000 barrels per day (bpd) of Venezuelan crude entered India in August, compared to 218,000 bpd in July. Reliance Industries was the sole buyer in July and September and the largest buyer in August.

Grades from Oman and Brazil offered the following discounts to the ICB in August—$10–$11 per barrel on delivery terms. Typically, Iraqi and Russian grades, which together account for more than half of India's crude oil imports, are among the cheapest. They averaged $62 per barrel in February but rose to $93 per barrel and $88 per barrel, respectively, in August.

The Indian Crude Basket formula was calculated in August using a 75 percent weight for international benchmark crude commodities linked to Brent imported into India and a 25 percent weight for the Dubai/Oman benchmark, according to the Ministry of Petroleum of India. Traditionally, the ICB was mainly determined by grades linked to Dubai/Oman. However, higher imports of Russian crude oil after the start of the conflict in Ukraine in 2022 and disruptions in the supply of sour grades after the start of military actions in the Middle East in March shifted the basket towards Brent-linked oil.

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Some experts believe that this tariff waiver occurred at a time when the US itself had to purchase diesel fuel from Russia as part of a major deal. Under these circumstances, the question arises as to how the US can apply tariffs to other countries. Furthermore, negotiations continue between India and the US, and Washington is likely avoiding measures that could worsen the dialogue with India.

Experts also suggest that similar steps are being taken regarding China, leading Trump to decide to suspend the introduction of tariffs in the interest of the US. However, this does not mean that tariffs will never be imposed against buyers of Russian oil, as the US reserves the right to apply them at any time.

As the war between Russia and Ukraine continues, the US claims that financial support for Russia is provided through the sale of its oil, which contributes to prolonging the conflict. In this regard, the US proposed introducing tariffs for countries purchasing Russian oil. Initially, it was proposed to impose a tariff of up to 500% on the import of Russian oil and gas, with the aim of effectively denying these countries access to the American market.

In January 2026, Trump supported a bill promoted by the late Republican Senator Lindsey Graham. Graham argued that such a threat would allow the US president to pressure India, China, and Brazil into reducing their purchases of discounted crude Russian oil.

However, the initial plan with a 500% tariff was not maintained. A later version of the law limited the maximum tariff level to 100% for major buyers of Russian energy. The American president could use tariffs on goods imported from countries buying Russian oil and gas to encourage them to change their procurement model, although the potential rate was significantly lower than the previous proposal.

Graham's law, signed by Trump on September 18, 2026, authorized tariffs of up to 100% on the five largest global importers of Russian energy. It also expanded sanctions against Russia and provided measures against organizations attempting to circumvent existing restrictions. This change was significant for India, as such a large-scale tariff could affect not only crude oil imports but also bilateral trade, complicating negotiations and putting pressure on Indian goods entering the US.

The next change occurred on October 17, when Trump utilized the exemption provision within the Graham Act. His executive order suspended the application of restrictions, boundaries, and duties under the law, citing US national interests. This order did not repeal the law nor did it permanently deprive the president of the right to use it; instead, it temporarily suspended its effect, leaving him the option to reinstate them later.

business-standard.comOctober 14, 12:02

Oil and gas supplies from the US to India fell by 43% amid increased imports from West Asia

High freight costs, longer sea routes, and limited supply of medium sour crude oil have made American grades less attractive to Indian refineries compared to alternatives from West Asia and Russia, specialists note.

According to three senior officials from refining companies, producers from West Asia, including the UAE, Iraq, and Saudi Arabia, will remain the leading energy suppliers to India after the war, as the US cannot replace them. This occurred against the backdrop of a sharp decline in oil and gas supplies from the US to India in September compared to the peak level in May of this year.

According to vessel tracking data, imports of crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG) from the US into India decreased by 43% in September, amounting to 1.22 million tons compared to 2.13 million tons in August. This was the lowest figure since April. Although the conflict in West Asia disrupted energy supplies to India since March, forcing Indian refiners to seek other sources, supplies from the US only slightly decreased in September 2025.

Furthermore, supplies from the US fell more than twofold compared to the two-year high of 2.86 million tons in October 2025, equivalent to billions of dollars in reduced purchases. Meanwhile, imports of oil and gas from West Asia sharply increased by 67% in September compared to August, reaching 13.56 million tons, according to vessel tracking data.

Oil exports from the Persian Gulf recovered to approximately 16.5 million barrels per day (bpd) in September, approaching pre-war levels, although only 60% of these barrels passed through the Strait of Hormuz compared to 83% before the war. The trade journal OilPrice reported, citing a Standard Chartered note, that Saudi Arabia, the UAE, and Iraq were able to adapt using pipelines, port circumvention, and extensive ship-to-ship transfers, which weakened Iran's ability to block regional oil exports.

Senior officials from state-owned refining companies stated that while Washington urged New Delhi to increase energy imports, the government did not provide directives on where to purchase crude oil, LPG, or LNG. Economic viability remained the priority. These officials noted that record freight rates and the limited supply of medium sour crude from the US—which is most suitable for India's complex refineries—made importing light sweet premium American crude less attractive compared to Russian oil.

According to Kpler, crude oil imports from the US in October dropped by about 30% compared to all of September, totaling 91,000 barrels per day. The charter rate for Very Large Crude Carriers (VLCCs), capable of carrying about 2 million barrels of crude oil, has increased more than 20 times from pre-war levels to nearly $1.5 million per day from $50,000–$75,000 in early 2026, reported the Abu Dhabi ship broker. Transportation and insurance now account for 20–25% of the crude oil shipment cost, whereas before the war, this figure was less than 5%.