Saudi Arabia may soak up some of Iran’s previous market share on the Indian market as Saudi Aramco is set to ship additional 2 million barrels per month to Indian Oil Corp between July and December this year on top of the existing term supply deal between the two companies.
“We have told them we will be taking 2 million barrels every month for six months from July (about 1.6 million tons in total) and they have agreed,” A K Sharma, Indian Oil’s director (finance), told Reuters this week.
India, Iran’s second largest oil customer after China, was one of the eight countries that were granted six-month waivers to continue buying oil from Iran after the U.S. re-imposed sanctions on the Iranian oil industry in November. The United States, however, pursued a maximum pressure campaign against Iran last month and put an end to all sanction waivers for all Iranian oil buyers.
This put Indian refiners in a position to source the market for alternatives, and many of them, especially private companies, did, because they are wary of possible secondary U.S. sanctions if they continue to buy oil from Iran.
Indian Oil Corp has a term deal with Saudi Aramco to buy a total of 5.6 million tonnes in the financial year 2019/2020, plus an option to buy another 2 million tonnes, according to Reuters.
Indian Oil diversified its crude suppliers in the 2018/2019 fiscal year, and entered for the first time in a term contract to source oil from the United States, boosting its capabilities to process crude grades from a wider and cheaper basket, the company said in its annual results this week.
Despite the fact that Indian Oil has asked for extra Saudi supply, Indian refiners as a group are said not to be rushing into buying extra crude from the Kingdom. Indian firms have been looking for months to diversify their crude sources and as the Kingdom raised its prices to Asia to take advantage of the supply crunch.
Of the four state-held Indian refiners that bought Iranian oil under the sanction waivers, Mangalore Refinery and Petrochemicals (MRPL) is the only one to have taken up the Saudi’s offer for additional crude, industry sources informed Reuters on Monday.