After imposing 25% “penalty” tariffs on India for importing Russian crude — which were lifted last month — the U.S. on Thursday granted a 30-day exemption to New Delhi for acquiring crude from Moscow amid the upheaval in the Iran war affecting global supplies.
The West Texas Intermediate oil jumped 8.51%, or $6.35, to end at $81.01 per barrel on Thursday, marking the largest single-day increase since May 2020. The global standard Brent rose 4.93%, or $4.01, to close at $85.41 per barrel.
The exemption for purchasing Russian oil will alleviate global supply concerns as India ranks as the fourth largest refiner in the world and the fifth largest exporter of petroleum products. Brent and WTI crude experienced over 1% declines on Friday, last trading at $84.42 and $79.92 per barrel, respectively.
New Delhi, being the world’s third largest oil importer, had been substituting Russian oil supplies with those from the Middle East, experts indicated, but as the conflict disrupted energy supplies from Gulf countries, it is beginning to source energy from Moscow once again.
“I have heard that Indian refiners have actively been pursuing immediate Russian crude supplies since last weekend,” stated Muyu Xu, senior research analyst for crude at energy data tracker Kpler, adding that per “market chatter,” New Delhi may have acquired up to 6-8 million barrels of Russian oil in the last 2–3 days.
This “temporary solution will not yield significant financial advantages” for Russia as it solely permits transactions of oil currently stranded on vessels, according to U.S. Secretary of the Treasury, Scott Bessant in a post on X.
The U.S. administration is taking measures to mitigate rising oil prices, including offering political risk insurance for tankers navigating the Gulf. U.S. crude prices have surged nearly 20% this week due to the intensifying conflict in the Middle East.
“Further actions to ease oil pressures are forthcoming and … in the long run, our initiatives will significantly enhance the stability of the region and oil pricing,” U.S. President Donald Trump said on Thursday.
“It [the exemption] acts as a pressure relief valve, considering the loss of close to 20 million barrels per day of crude from Gulf producers,” remarked Vandana Hari, CEO of the energy research firm Vanda Insights, adding that the 30-day exemption was “far from adequate” and Washington continues to apply “band aids on a gunshot wound.”
Hari anticipates Brent crude to persist in “creeping higher than the $80s” as she believes the prospect of the Hormuz blockade being quickly lifted is “exceptionally slim.” Traffic in the Strait of Hormuz, which facilitates 20% of global oil flow, remains halted due to Iranian warnings and soaring insurance costs for shipping.
“Our data indicates that no loaded crude tankers have traversed the Strait of Hormuz since last weekend, including those potentially destined for India,” Xu said.
Consequences for India
India presently possesses “access to approximately 100 million barrels,” sufficient to meet up to 45 days of crude demand, Prateek Pandey, head of APAC oil and gas research at energy intelligence firm Rystad Energy, communicated to CNBC’s “Inside India” on Thursday.
Pandey noted that Indian refineries won’t face challenges for the next three to four weeks, but “there will be worries,” if disruptions in the Middle East persist beyond that.
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Last August, India faced a 50% tariff from the U.S., including 25% as a punishment for buying Russian oil. Last month, this penalty was lifted contingent upon India reducing imports from Moscow and increasing American energy purchases. Washington cautioned it could reinstate the tariff if India resumes purchasing Russian oil.
“I have yet to observe any uptick in U.S. crude shipments to India,” said Xu, adding that any increase in New Delhi’s buying of American oil following the trade agreement will only reflect in data for April or May.
