Oil prices declined for a third day in a row in the international market on Wednesday, despite geopolitical tensions, as the US Federal Reserve is not expected to reduce interest rates any time because of the high inflation rate.

Prices of the benchmark Brent crude have now come down to $82.28 a barrel from close to $84 a barrel at the end of last week. The US West Texas Intermediate crude (WTI) futures were trading at $78.02 on Wednesday indicating the further softening of prices.

Since India imports close to 85 per cent of its crude requirement, the decline in oil prices reduces the country’s import bill and strengthens the rupee.

The Government has also helped to cut the country’s oil import bill by allowing the oil companies to buy Russian crude at discounted prices despite the pressures from Western countries to stop these purchases in the wake of the Ukraine war.

Russia has now emerged as the largest supplier of crude oil to India replacing Iraq and Saudi Arabia which occupied the top slot earlier. India has in fact become the largest purchaser of Russia’s seaborne oil which accounted for close to 38 per cent of India’s total oil imports in April.

In fact, India’s strategy of continuing to buy cheap oil from Russia has resulted in the saving of around $7.9 billion in the country’s oil import bill during the first 11 months of the fiscal year 2022-23 and also helped the country to lower its current account deficit.

The Narendra Modi government has stood firm in maintaining its ties with Russia despite the Western sanctions against Moscow. Since India is the third largest importer of crude in the world, these large purchases of Russian oil have also helped to keep prices in the world market at more reasonable levels which has benefited other countries as well.

Data compiled by the Ministry of Commerce and Industry shows that in volume terms, the share of crude petroleum imported from Russia jumped to 36 per cent in 11 months of FY2024 from 2 per cent in FY2022, while that from West Asian countries (Saudi Arabia, the UAE and Kuwait) fell to 23 per cent from 34 per cent. The discounts on Russian oil generated huge savings in the oil import bill.

According to an ICRA report, the imputed unit value of imports from Russia was 16.4 per cent and 15.6 per cent lower than the corresponding levels from West Asia in FY2023 and 11 months of FY2024, respectively.