New Delhi, October 4
Indian state refiners plan to lock-in more of their crude supplies in term deals, worried that tighter Western sanctions on Russia, including from the EU, could curb future supplies in already tight markets, sources at state refiners said.
Back-up plan
- New deals eyed to hedge against changed trade flow post December 5
- IndianOil has signed six-month import deals for Colombian and Brazilian oil
- IOC and BPCL seek to buy more US oil via term contracts
- IOC already has an annual deal that provides an option to buy 18 million barrels of US oil
Indian Oil Corporation (IOC), the country’s top refiner, and Bharat Petroleum Corporation (BPCL) are seeking term deals with countries, including the US, industry sources said.
“We are preparing for a back-up plan. When the world is uncertain because of the Russia-Ukraine conflict, we need to have all options open,” said an official at one state refiner.
The move towards term deals marks a shift in refiners’ purchasing strategy, which had been geared towards maximising spot purchases in past years when supplies were abundant.
“Due to the Russian-Ukraine conflict, we expect a possibility of tight oil markets and a change in flows with most Middle-Eastern crude going to meet need of European markets so we need to diversify our oil sources,” said a source at another state refiner.
India’s dependence on spot purchases allowed Indian refiners to snap up discounted Russian oil shunned by some Western buyers over Moscow’s Ukraine invasion in February. India, which rarely used to buy Russian oil, has emerged as Moscow’s second-largest oil customer after China.
But a European Union ban on Russian crude imports from December 5 will drive European refiners to buy more Middle-East oil, putting them in competition with Asian buyers.
To secure supplies, IOC last month signed its first six-month oil import deals with Brazil’s Petrobras for 12 million barrels and Colombia’s Ecopetrol for 6 million barrels. BPCL has signed an initial deal with Petrobras as it seeks to diversify oil sources.
Supplies for IOC under the two deals will begin from October, said several of the sources who are familiar with the matter. IOC is also looking for more short-term supplies, including a contract for US oil, they added.
IOC already has an annual deal that provides an option to buy 18 million barrels of US oil. Of these, IOC has already bought about 12 million barrels so far this year, they said.
Sources said BPCL, which has already ramped up U.S. oil purchases, is looking for more term contracts.
IOC and BPCL did not respond to requests for comment. Ecopetrol could not be reached for comments outside its business hours. — Reuters
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