New Delhi: Under order to secure more of its oil supplies in long-term agreements, Indian state refiners want to do so, according to sources at the refineries. They are concerned that tougher Western sanctions against Russia, especially those from the EU, may limit future supply in already constrained markets.
The main two refiners in the nation, Indian Oil Corp. and Bharat Petroleum Corp., are reportedly looking to sign long-term agreements with nations like the United States.
“We are preparing for a back up plan. When the world is uncertain because of Russia-Ukraine conflict we need to have all options open,” said an official at one state refiner.
The shift to term arrangements signals a change in refiners’ purchasing tactics, which in previous years when supplies were plentiful had been focused on maximising spot purchases.
“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 reliance on spot transactions allowed Indian refiners to buy Russian oil at a discount that several Western purchasers had turned down because of Moscow’s invasion of Ukraine in February.
India, which previously purchased Russian oil seldom, has now overtaken China as Moscow’s second-largest oil buyer.
However, starting in December, the European Union forbade the import of Russian crude.
5 will encourage Middle Eastern oil purchases by European refiners, putting them in competition with Asian consumers.
IOC signed its first six-month oil import contracts with Brazil’s Petrobras for 12 million barrels and Colombia’s Ecopetrol for 6 million barrels last month to ensure supply.
As part of its efforts to diversify its oil supply, BPCL has signed an initial agreement with Petrobras.
According to a number of people with knowledge of the situation, supplies for IOC under the two agreements will start arriving in October. They stated that IOC is seeking additional short-term supplies, including a contract for American oil.
IOC already has a yearly agreement that gives it the opportunity to purchase 18 million barrels of American oil. They claimed that IOC has already purchased 12 million barrels of these so far this year.
According to sources, BPCL, which has already increased its purchases of U.S. oil, is looking for new term contracts.
Numerous sanctions have been placed on Russia by Western nations, and the Group of Seven countries — led by the United States — plan to limit the price of Russian oil shipments through insurers in order to reduce their revenue. According to the sources, it is uncertain whether Russia will cut off supplies or if the strategy will succeed.
