Indian refiners have sought additional four million barrel of crude oil from Saudi Arabia in November, a move that might partly compensate for any fall in their imports from Iran consequent to the US sanctions on the Persian Gulf country to be effective November 4.
India’s oil imports from Saudi Arabia have been to the tune of 25 million barrels per month in recent past.
Saudi Arabia was India’s second largest source of oil imports in FY18, accounting for 15% of the country’s overall oil imports; Iraq is the top crude oil exporter to India with a 20% share in India’s overseas oil purchases.
While reports had said India might reduce oil imports from Iran to nearly zero due to the US sanctions, the government had said earlier this week that two state-run refiners — IOC and MRPL — have contracted 9 million barrel for crude from the country for November.
Reliance Industries, Hindustan Petroleum, Bharat Petroleum and MRPL are the companies which are looking to procure additional one million barrel each from Saudi Arabia, according to agency reports.
The development comes close on the heels of Saudi Arabia claiming it can replace Iranian oil which will be unavailable due to renewed US sanctions, a claim Iran has termed ‘exaggerated’.
Iran, which has emerged as the third largest exporter of oil in recent quarters, exported 8.1 million tonnes of crude to India in Q1FY19, compared with 5.6 mt in the year-ago quarter. Private refiners have been more aggressive in sourcing Iranian crude than the state-run firms.
US President Donald Trump had withdrawn JCPOA, also called the Iran Nuclear Agreement, which was agreed upon in 2015 with the UK, France, Germany, Russia, China wherein Iran was to curb its nuclear programmes in return of lifting financial sanctions. This also means that oil imports from the Persian Gulf country will be affected starting November 4. However, two Indian refiners have already placed orders of 9 million barrel of crude from Iran for November.
India has been hit by both rising crude oil prices and a weakening rupee which have also resulted in sharp spike in domestic retail auto fuel prices. While the retail fuel prices are determined taking into account international product prices, these prices move in tandem with crude oil prices.
To keep the Iranian oil flowing to India, a payment mechanism in rupee terms is also being explored as was done during the last sanction regime on Iran which ended in 2015. Last week, an inter-ministerial panel under commerce and industry minister Suresh Prabhu asked the ministry of petroleum and natural gas to explore payment mechanism to Venezuela, Russia and Iran in rupee terms in order to curb the currency’s volatility.
India imported 220 mt of crude oil in FY18, roughly 80% of its total consumption.Petroleum minister Dharmendra Pradhan on Monday said he spoke with Saudi energy minister Khalid al-Falih last week and reminded him that OPEC and other major oil producers had promised to raise their output at a meeting in June.
India imports an average of 25 million barrels per month from Saudi Arabia.
Reuters last week reported that Russia and Saudi Arabia, the world’s two biggest oil producers, struck a private deal in September to raise output to cool rising prices and had informed the US about the decision.