The government has urged state-owned oil companies to look into buying more US and Venezuelan crude following a trade deal in which the Trump administration said India had agreed to limit imports of Russian oil, Bloomberg reported.
The development comes even after Commerce Minister Piyush Goyal said the trade deal with the US is not affected by Russian oil imports. He has also previously stated that buying oil or energy from the US is in the country’s own strategic interest and the companies themselves make the decision.
However, refiners have been asked to prefer US grades when buying from the spot market through tenders, according to the agency’s report. The government has also nudged refiners for Venezuelan oil, although those deals will be closed through private negotiations with traders.
Russian oil imports under scrutiny
India’s oil purchases have come under scrutiny after President Donald Trump said the country had agreed to cut Russian oil imports as part of a trade deal, a claim that Delhi has not directly addressed publicly.
When questioned further about Trump’s claim, India repeatedly replied that it was simply trying to diversify its oil resources and energy security remained the nation’s top priority.
The Trump administration tapped trading giants Vitol Group and Trafigura Group to sell Venezuelan oil after the US captured President Nicolas Maduro and his wife Cilia Flores earlier this year. After taking them to New York, Washington has asserted control over the nation’s energy industry, with Indian buyers recently picking up some of the upfront costs, the news agency said.
State refiners, including Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp, have recently bought about 4 million barrels of Venezuelan oil, with refinery management saying that is the maximum limit of heavy, sour crude from the Latin American nation that state refiners can process per month.
Does US crude meet the demands of Indian refiners?
There are limits to how much oil refineries can buy from the US and Venezuela. US crude is light and has lower sulfur content, which does not suit many Indian refiners, which are designed to process intermediate crudes. Price will also be a key factor in these decisions.
In addition, there is doubt about the economic viability of importing larger volumes from the United States, especially in the near term, due to higher transportation costs that limit the cost-effectiveness of long haul routes. Indian refiners also have the option of getting cheaper alternatives from West Africa and Kazakhstan, which are located at a closer shipping distance.
Indian refiners could potentially buy around 20 million tons of U.S. crude a year, or about 400,000 barrels a day, refinery executives told Bloomberg. That amount would still be higher than what they imported last year, with Kpler estimating daily imports of 225,000 barrels.