What the Rosneft-Reliance giant supply deal means for oil markets

Just as the European Union announced its 15th package of sanctions on Russia, mostly targeting the country’s shadow fleet, the largest Russian oil firm Rosneft has reportedly clinched one of the biggest crude supply deals in recent history. The new Rosneft-Reliance deal is set to be signed for 10 years, as opposed to the previous one-year contracts and stipulates that deliveries could go all the way up to 500 kbd, fivefold the volume of this year’s outgoing term contract. Let's look into some of the main ramifications of this unusually ambitious deal.

Market & Trading Calls

• Bullish on Russian crude flows to India: With the Rosneft-Reliance deal scaling up to 500 kbd, the current export rate of 1.7-1.8 Mbd becomes the new base case with higher seasonal upside.
• Bearish for Middle Eastern grades: Increased Urals volumes could squeeze out Middle Eastern crude from Reliance's Jamnagar refinery slate, particularly if AXL or Murban start to appreciate again.
• Stable Urals pricing outlook: The medium sour grade's discount expected to trend at -$3/bbl to Dubai through 2025.
• Intra-Indian reallocation of Russian flows underway: Lukoil and Surgutneftegaz may redirect spot Urals and CPC cargoes to other Indian (non-Reliance) refiners.