NEW DELHI; Reuters/GANASHAKTI - Only one Indian buyer of Iranian oil has taken up Saudi Arabia’s offer of additional oil to make up for the loss of supplies from Tehran due to U.S. sanctions, taking an extra 2 million barrels from the Kingdom for June shipment, industry sources said.
Last month, Saudi Arabia approached Indian buyers offering them additional supplies to compensate for loss of Iranian oil after the United States threatened to sanction entities buying oil from Tehran, the sources said.
The United States had imposed new sanctions on Iran in November last year, but gave a six-month waiver to eight countries, including India, which allowed them to import some Iranian oil.
India was able to buy about 300,000 barrels per day (bpd) of Iranian oil under the waiver. But last month, Washington ended the waivers and said buyers should stop Iranian oil purchases or face sanctions.
Only state refiners - Indian Oil Corp, Bharat Petroleum Corp, Mangalore Refinery and Petrochemicals and Hindustan Petroleum Corp - accounting for about 60 percent of India’s 5 million bpd refining capacity had purchased oil from Iran since November.
In January-April 2019 India received about 304,500 bpd Iranian oil.
In June, Saudi Arabia will supply an additional 250,000 tonnes (2 million barrels) of oil to Mangalore Refinery (MRPL) on top of its normal requirement of about 320,000 barrels (about 2.5 million barrels), one of the sources familiar with the matter said.
Another source said MRPL might not lift the additional Saudi oil as the refiner had declared force majeure and shut half of its plant due to water shortages.
Mangalore Refinery declined to comment. There was no immediate comment from IOC, HPCL, BPCL and Saudi Aramco.
“In our system, UAE and Iraq oil turned out to be better than Saudi oil,” a source at one of the Indian refineries said.
IOC, BPCL and HPCL have not placed a request for extra Saudi oil for June after the Kingdom raised official selling price for Asia, the sources said.
“Saudi OSPs for June have been very strong, so Indians may have taken extra from others at competitive rates,” said Sri Paravaikkarasu, director for Asia oil at Singapore-based consultancy FGE.
When Iran was under sanctions in 2012, Saudi Arabia and Iraq had raised market share in Asia. But since that time trade routes have shifted with new supplies, including from the United States, coming on to the markets.
“Saudi will have to fill some of the void left by Iran but it will not be a one to one replacement,” Paravaikkarasu said. “Indian refiners’ oil import policy is very flexible now and they are no longer relying on one or two particular producers.”
Indian refiners have raised optional volumes under annual contracts with key producers as well as testing new grades and origins to make up for loss of Iranian oil.
Also, U.S. crude’s widening discount to Brent has strengthened demand for U.S. crude exports.
“India wants to diversify away from Middle East because of lots of geopolitical issues relating to the region,” Paravaikkarasu said. “The Middle East will continue to be the mainstay for Indian refiners but they would like to tap new stable areas when it comes to requirement of incremental barrels.”
