In an attempt to mitigate the effects of high prices of oil globally, the US government has granted permission to purchase Russian oil for another month. According to the US Treasury documents, the extension of the permit allows the purchase of Russian petroleum products that are loaded on vessels. This means that other nations such as India can purchase the Russian oil stranded in the vessels, although they have to pay a higher cost.

According to CBS News, approximately 124 million barrels of Russian oil are stranded in vessels around the globe. Although this quantity of oil will boost supply, it will not have much effect on the prices of oil. Russia has 120 million barrels of oil floating in the oceans, which is equivalent to one day of global oil consumption, amounting to about 104 million barrels daily.

Warren Patterson, head of commodities strategy at Dutch bank ING, said the US move will not fully compensate for the supply disruption. There is only one solution for the oil market: the smooth resumption of supplies from Hormuz. India and other Asian countries are the most likely to purchase this newly available Russian oil.

The US Treasury Department stated that this short-term exemption will not provide any financial benefit to Russia, as it derives most of its energy revenue from taxes levied at the point of extraction.

The price differential between Russian oil and Brent crude has narrowed significantly since the Iran crisis began. On Tuesday, Russian Urals was trading at $101-102 per barrel, and Brent crude at $110 per barrel. In February, before the war, Russian Urals was priced at $55, and Brent crude was around $70.

The price difference between Russian oil and Brent crude is now just $8, compared to $15 per barrel before the war. Thus, while Russian oil will be available on the market, it will not be as cheap as before.

India hopes to purchase the surplus Russian oil that becomes available. This could provide some relief to India and other countries. It will reduce short-term supply risks. Russia remains a major source of cheap oil for India. As long as this exemption continues, refineries will be able to maintain existing trade flows with fewer legal risks.

India is trying to ensure it has enough oil for its needs. At the same time, it is complying with Western sanctions regulations. This exemption will help India continue purchasing Russian oil without directly impacting those sanctions.