New Delhi: Sources in state refiners said Indian state refiners are planning to lock-in their crude oil supplies in term deals, worried that tighter Western sanctions on Russia, including the European Union, are in already tight markets. Can block future supplies.
Industry sources said Indian Oil Corp, the country’s top refiner and Bharat Petroleum Corp are seeking term deals with countries including the United States.
“We are preparing a backup plan. When the world is uncertain because of the Russia-Ukraine conflict, we need to keep all options open,” said an official at a state refiner.
The move to term deals marks a change in the refiner’s buying strategy, designed to maximize spot buying in previous years when supplies were plentiful.
“Due to the Russian-Ukraine conflict, we expect tighter oil markets and a change in the flow of most Middle Eastern crude, so we need to diversify our oil sources,” said a source in another state. ” Researcher
India’s reliance on spot buying allowed Indian refiners to snatch discounted Russian oil left behind by some Western buyers at Moscow’s Ukraine invasion in February.
India, which rarely buys Russian oil, has emerged as Moscow’s second largest oil customer after China.
But the EU ban on Russian crude imports from December 5 will prompt European refiners to buy more Middle East oil, putting them in competition with Asian buyers.
To secure supplies, the IOC last month signed its first six-month oil import deals with Brazil’s Petrobras for 12 million barrels and Colombia’s Ecopetrol for 6 million barrels.
BPCL has signed a preliminary agreement with Petrobras to diversify oil sources.
As part of the two deals, the supplies for IOC will start from October, several sources familiar with the matter said. He said the IOC is also looking for more short-term supplies, including a contract for US oil.
The IOC already has an annual deal that offers the option to buy 18 million barrels of US oil. Of these, IOC has bought about 12 million barrels so far this year.
Sources said BPCL, which has already ramped up US oil purchases, is looking for longer contracts.
The IOC and BPCL did not respond to Reuters requests for comment. Ecopetrol could not be contacted for comment outside of its business hours.
Western countries have imposed several sanctions against Russia, and the Group of Seven countries led by the United States plans to impose price caps on Russian oil exports through insurers to cut its revenue. Sources said it was unclear whether the plan would work and whether Russia would cut supplies.
“There are many uncertain elements … so we think we should at least have engagements with more suppliers,” said another source.
India has called for an end to the violence in Ukraine but has avoided outright condemnation of Russia, with which it has longstanding political and security ties.
Prashant Vashisht, vice-president, rating agency ICRA Ltd, said: “To diversify and protect ourselves from possible future cuts, such as diverting Middle Eastern oil to Europe, signing a contract is the best option as you will get preferential pricing. And get a steady supply.”
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