The diesel export ban by Russia opened a unique opportunity for India to shore up export revenues in times of falling global merchandise trade and rising crude oil prices. The benefit may be felt in managing the current account deficit, which was 1.1 percent in June and was expected to be wider. The export of refined petroleum products at a premium may help arrest the trend.
Bloomberg reported on September 30 that “Russia plans to reduce diesel exports from its key western ports to almost nothing next month (October)”. Notably, October is the peak winter stocking period which lasts up to the first or second week of November. The ban came on the back of a cut in crude production by the Organisation of the Petroleum Exporting Countries (OPEC) in July. Crude prices (WTI) last reached a decadal high of nearly $116 a barrel on June 6, 2022. However, it failed to hold the peak and declined steadily to settle at around $70 a barrel during the June quarter of this fiscal. India played a crucial role in bringing down the prices in 2022 by buying Russian crude at a deep discount, ignoring the US sanction.
Elevated Prices
The situation has been in reverse gear lately. Firstly, the reopening of China (after prolonged Covid lockdowns) and fast growth in India increased the oil demand. The discount on Russian crude was reduced dramatically. The production cut by OPEC made the market tighter. Crude is now nearing the $100 a barrel mark.