Indian Oil Corporation (IOC) today bought its third shipload or cargo of US crude oil as it looks at cheaper alternatives that have emerged due to the global supply glut.
IOC bought 2 million barrels of light Louisiana sweet crude oil in a tender today, official sources said.
The oil is for delivery at its Paradip refinery in Odisha during April 11-20.
IOC’s Paradip refinery had in October last year received India’s first ever shipment of US crude oil when it imported a 1.6 million barrels parcel.
Prior to today’s buying, IOC had placed a cumulative order of 3.9 million barrel of US crude.
Sources said IOC had previously imported blend of two grades of crude oil but in today’s tender it has bought the entire 2 million barrels of single grade crude oil.
State-owned Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corp Limited (HPCL) had also placed orders for about 2.95 million barrels and 1 million barrels of US crude respectively for their Kochi and Visakhapatnam refineries.
The October cargo was the first shipments to India since the US stopped oil exports in 1975.
IOC’s first purchase of US crude comprised 1.6 million barrels of high sulphur crude Mars and 400,000 barrels of Western Canadian Select oil. In the second, it bought 1.9 million barrels of US crude, half of it being shale oil.
The second shipment was for the west coast.
India, the world’s third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy US crude after production cuts by oil cartel OPEC drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.
Buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in the western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed.
Even after including the shipping cost, buying US crude is cost competitive for Indian refiners, sources said.
India started buying US crude within weeks of Prime Minister Narendra Modi’s June 2017 visit to the US when President Donald Trump talked of his country looking to export more energy products to India.
To encourage US crude purchases, the government has allowed refiners to use a foreign rather than an Indian-owned vessel for the purchase. Indian refiners typically have to use domestic vessels for their crude imports.
Sources said IOC has bought the third cargo on DES or Delivered Ex Ship basis. Read More