In a recently negotiated deal to deliver Russian oil to India, Rosneft, a major Russian oil producer, and Indian Oil Corp, a leading refiner, have agreed to use Dubai’s oil price benchmark. These companies are both state-controlled. This move is seen as potentially leaving the standard Brent benchmark, a longstanding European standard.
This brings us to the question: is Russia moving away from the Brent benchmark?
What is Dubai’s oil price benchmark?
The Dubai oil price benchmark is also a pricing mechanism like the Brent crude oil benchmark. The difference is that it is a more common benchmark for the Asian market. It is a benchmark used as a price reference for both spot and forward Dubai crude oil contracts. While the Brent benchmark is quoted in dollars and used by European oil companies and traders, the Dubai benchmark is measured in the Fateh.
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Russia shifts to Dubai benchmark
According to Reuters and their sources close to the case, this development is part of a general shift in Russia’s oil sales in Asia after Europe denied Russian oil following their invasion of Ukraine. One of Rosneft’s executives stated earlier this year that it is normal that the price of Russian oil is now set outside Europe – Asia has emerged as the largest buyer of Russian oil since the West imposed sanctions on oil exports.
Under the new agreement dated March 29, Rosneft will nearly double its oil sales to Indian Oil Corp., a state-owned refinery. Rosneft could sell up to 11 million barrels per month to Indian Oil Corp. for their new fiscal year starting April 1. The oil will be sold at Dubai benchmark prices and discounted to around $8-$10 a barrel.