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The Indian government has reportedly urged state-owned oil companies to purchase more US and Venezuelan crude after a trade deal with the Trump administration.
The government has urged state-owned oil companies to look at purchasing more US and Venezuelan crude, after a trade deal in which the Trump administration said India agreed to cut back on Russian oil imports, Bloomberg reported.
This development comes even as Commerce Minister Piyush Goyal said that the trade deal with the US is unaffected by Russian oil imports. He also said earlier that buying crude oil or energy from the US is in the country's own strategic interests, and the decisions are taken by the companies themselves.
However, refiners have been asked to prioritise US grades when they buy from the spot market through tenders, according to the agency report. The government has also nudged refiners towards Venezuelan crude, though those deals will be done through private negotiations with traders.
Russian oil imports under scrutiny
India’s oil purchases have been under scrutiny after President Donald Trump said that the nation has agreed to cut Russian crude imports as part of the trade deal, a claim New Delhi has not directly addressed publicly.
When further quizzed about Trump's claim, India has repeatedly responded that it’s simply seeking to diversify its oil sources and energy security remained the top priority for the nation.
The Trump administration has tapped trading giants Vitol Group and Trafigura Group to market Venezuelan crude after the US captured President Nicolas Maduro and his wife Cilia Flores earlier this year. After flying them to New York, Washington asserted control over the nation’s energy industry, with Indian buyers snapping up some initial cargoes recently, the news agency said.
State-run refiners, including Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp, recently bought about 4 million barrels of Venezuelan oil, with refinery executives stating that is the maximum limit of heavy, sour crude from the Latin American nation that state refiners can process on a monthly basis.
Can US oil fit the requirement of Indian refiners?
There are certain limits to how much oil refiners can buy from the US and Venezuela. American crude is light and has lower sulfur content, which does not suit many Indian refining units that are designed to process medium crudes. Price will also be a key factor in these decisions.
Additionally, there is a doubt over the economic viability of importing larger volumes from the United States, especially in the near term, due to higher freight costs limiting the cost-effectiveness of long voyages. Indian refiners also have the option to receive cheaper alternatives from West Africa and Kazakhstan that are located at a closer shipping distance.
Indian processors could potentially take around 20 million tons a year of US oil, or about 400,000 barrels a day, the 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.
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