Amid supply concerns, the US offers India a 30-day exemption on Russian crude oil

The United States on Thursday gave New Delhi a 30-day exemption from buying oil from Moscow, after imposing 25% “penalty” tariffs on India on purchases of Russian oil (rescinded last month) as the Iran war disrupts global supplies.

West Texas Intermediate crude oil soared 8.51%, or $6.35, to close at $81.01 per barrel Thursday, its biggest single-day gain since May 2020. Brent crude, the global benchmark, rose 4.93%, or $4.01, to settle at $85.41 per barrel.

India is the world’s fourth-largest oil refiner and fifth-largest exporter of petroleum products, so an exemption from purchasing Russian crude will help alleviate global supply concerns. with brent WTI crude oil They fell more than 1% on Friday and were last trading at $84.42 and $79.92 per barrel, respectively.

New Delhi, which is also the world’s third-largest oil importer, has been replacing oil purchases from Russia with supplies from the Middle East, but is starting to ramp up energy from Moscow as the conflict affects energy supplies from the Gulf state, experts said.

“We have heard that Indian refiners have been actively seeking quick supplies of Russian crude since the end of last week,” said Muyu Shu, senior research analyst for crude oil at energy data tracker Kpler, adding that based on “market buzz,” New Delhi likely purchased up to 6 million to 8 million barrels of Russian crude in the past two to three days.

U.S. Treasury Secretary Scott Bessant said in a post on X that the measure “does not have significant economic benefits” for Russia because it only allows trading in oil that is already at sea.

The U.S. government has taken steps to curb oil price increases, such as providing political risk insurance to tankers sailing in the Gulf. US crude oil prices rose about 20% this week as the Middle East conflict intensified.

“Further steps to relieve pressure on oil are imminent, and over the long term the steps we are taking will dramatically increase stability in the region and in oil prices,” US President Donald Trump said on Thursday.

“Given the nearly 20 million barrels of oil per day lost from Gulf producers, this (waiver) is a relief valve,” said Vandana Hari, CEO of energy research firm Vanda Insights, adding that the 30-day waiver “is far from enough” and that the U.S. government continues to put “a band-aid on a gunshot wound.”

Hari feels it is “very unlikely” that the Hormuz blockade will be lifted soon, and expects Brent oil prices to “continue to inch above the $80s.” Traffic in the Strait of Hormuz, a waterway used for 20% of the world’s oil flows, remains at a standstill amid warnings from Iran and rising insurance costs for shippers.

“According to our data, no crude oil tankers with potential bound for India have passed through the Strait of Hormuz since last weekend,” Xu said.

India currently has “approximately 100 million barrels of access”, enough to meet up to 45 days’ worth of crude oil needs, Prateek Pandey, head of APAC oil and gas research at energy intelligence firm Rystad Energy, told CNBC’s “Inside India” on Thursday.

Pandey said India’s refineries would not be affected for the next three to four weeks, but there would be “concerns” if the turmoil in the Middle East continued beyond that.

He said sourcing from alternative destinations such as Venezuela poses challenges as these cargoes take almost a month to reach India.

In August last year, India was slapped with a 50% tariff by the US, including a 25% penalty on purchases of Russian crude oil. Last month, the penalty was lifted on condition that India reduce imports from Moscow and buy more U.S. energy. The US government has warned that sanctions could be reinstated if India resumes purchasing Russian crude oil.

“We have not yet seen an increase in US crude oil arrivals in India,” Xu said, adding that if New Delhi increases its purchases of US crude following the trade deal, it will be reflected in the April or May statistics.