InvestorQ : Is it true that India is preferring to buy crude from the US rather than Saudi Arabia and what is the reason for the same?
Sam Eswaran made post

Is it true that India is preferring to buy crude from the US rather than Saudi Arabia and what is the reason for the same?

Moii Chavate answered.
1 year ago

There are some interesting developments in the India crude procurement scenario that you must be familiar with.

· For the month of Feb-21, the crude oil imports into India from the United States jumped to 2.11 MMT, one of the highest monthly procurement from the US.

· This virtually dislodges Saudi Arabia from being the second largest supplier of crude to India to become the third largest oil exporter to India after Iraq and the US.

· India has been consistently looking to diversify its oil basket and also to reduce its dependence on the OPEC nations for oil.

· This is for the first time that the US has displaced Saudi Arabia in the second spot as an oil exporter to the Indian nation.

· India had been unhappy that Saudi Arabia and the OPEC had refused to give due weightage to India’s viewpoint on OPEC supplies and had anyways planned to cut imports of crude from Saudi Arabia.

· India faces a double whammy from rising crude prices. On the one hand it puts pressure on the current account deficit and on the other hand it spikes petrol and diesel prices.

· February crude inflows from the US stood at 2.11 MMT, which is nearly 32% higher than the 1.61 MMT of inflows from Saudi Arabia. Of course, Iraq retained its position as the top supplier with shipments of 2.89 MMT in February.

· In addition, India is also eyeing long term crude contracts with its old partner Russia to help stabilize crude and petrol prices in India.

· India has already signed the its first term contract for crude oil from Russia last year, IOC and Rosneft inking the agreement for 2 MMT Urals grade crude.

· Diversification of crude basket is a good strategy as India is vulnerable to an increase in global prices as India still relies on imports for 80% of its daily oil needs.

· What is actually worrying is that the Indian crude basket comprising Oman, Dubai and Brent crude was at $65.19/bbl a barrel and is putting pressure on the fisc.

· For India it makes sense to source light sweet crude from the US as the arbitrage economics work out more profitably.

· Crude will be the bread and butter as India is emerging as a key refining hub in Asia with installed capacity of over 249.36 MTPA across 23 existing refineries and all set to grow to 400 MTPA by year 2025.