Saudi Arabia to Supply India 4 Million Extra Barrels of Oil Next Month
OCT 14, 2018: Saudi Arabia, the world’s biggest oil exporter, will supply Indian buyers with an additional 4 million barrels of crude oil in November, several sources familiar with the matter said on Wednesday.
The extra cargoes indicate a willingness by the kingdom to increase crude supply to make up the shortfall once sanctions by the United States on oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), kick in on November 4.
India is Iran’s top oil client after China, and some refiners have indicated they will stop taking Iranian barrels because of the sanctions.
Reliance Industries Ltd, Hindustan Petroleum Corp, Bharat Petroleum Corp and Mangalore Refinery Petrochemicals Ltd are seeking an additional one million barrels each in November from the kingdom, the sources said.
Given their dependence on Iranian oil supplies, the Indian refiners are concerned about the loss of Iranian crude once the sanctions start and are seeking exemptions from the US. Two Indian refiners have ordered two cargoes of Iranian oil, a total of 9 million barrels, for November delivery.
India is unlikely to cut off completely the cheap Iranian oil that is suitable for its refineries, report OilPrice.com citing Indian government officials.
Petroleum Minister Dharmendra Pradhan earlier this week told media that India had hoped to score a sanction waiver from Washington because it had significantly reduced its intake of Iranian oil ahead of the November 4 deadline, but he mentioned no plans to bring this down to zero.
Recent reports have it that India has discussed ditching the U.S. dollar in its trading of oil with Russia, Venezuela, and Iran, instead settling the trade either in Indian rupees or under a barter agreement.
Related Article: Indian Rupee Hits Record Low Vs. Dollar On Rising Oil Prices
India wants to keep importing oil from Iran, because Tehran offers some discounts and incentives for Indian buyers at a time when the Indian government is struggling with higher oil prices and a weakening local currency that additionally weighs on its oil import bill.
But the United States continues to insist that it expects Iranian oil buyers to bring their purchases down to zero.
India, the world’s third biggest oil importer, is grappling with a combination of rising oil prices and falling local currency, which makes imports of dollar-denominated oil more expensive. Retail prices for gasoline and diesel fuel in India are at record highs and the government has cut its excise tax on fuel to ease some of the pain for consumers.
Related Article: India’s Oil Appetite is Growing, And Its Refineries Can’t Keep Up
The country will face “internal” issues in the form of higher inflation and possibly weaker growth from high oil prices (if oil prices were to stay at current levels of $80/barrel), according to Kotak Institutional Equities.
Pradhan said on Monday that he spoke with Saudi Energy Minister Khalid al-Falih last week and reminded him that OPEC and other major oil producers had promised to raise their output at a meeting in June.
India imports an average of 25 million barrels per month from the Saudi Kingdom.
Last week Russia and Saudi Arabia, the world’s two biggest oil producers, struck a private deal in September to raise output to cool rising prices and had informed the United States about the decision, according to Reuters.
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