India’s largest state-owned refiner, Indian Oil Corporation (IOC), will reduce slightly the volumes of Middle East crude oil it will buy under annual term deals in the 2027/2028 fiscal year starting next March, amid uncertainty of supply from the region, an anonymous source with knowledge of the plans told Reuters on Wednesday.
IOC initially planned to procure 47% of its crude oil from the Middle East for the coming fiscal year, but it would now “slightly” reduce this share, according to Reuters’ source.
Refiners in India have relied on Middle Eastern supply for decades due to the short travel times and heavier and higher-sulfur crudes suitable for Indian refinery specifications.
But the war in Iran and the disrupted supply of crude oil from the Middle East have changed India’s crude sourcing policies, while ongoing attacks on vessels in the Strait of Hormuz have hiked war-risk premiums and freight costs.
Indian refiners have suspended some term purchases and turned to the spot market for oil, tapping additional volumes of crude oil from South America, including Brazil, Venezuela, and Ecuador, to offset the supply lost in the Persian Gulf.
The higher availability of Middle Eastern crude could still entice Indian customers, as producers have started to offer cargoes at discounts to the regional Dubai/Oman benchmark to compensate for high freight and insurance premium costs. Some exporters in the Middle East are now offering spot cargoes on a delivered basis and are paying part of the high shipping costs to retain market share in the prized Asian markets.
India, specifically, paid $15.4 billion to import crude oil in September, up by 46% from the year-ago import bill of $10.5 billion, as international oil prices and the Indian import crude basket soared amid reignited tensions in the Middle East. In the period April to September, India’s crude oil import bill also jumped by 46.3% to as high as $90.6 billion, up from $61.9 billion in the same period last year, entirely due to the surge in oil prices, as import volumes have remained flat or lower than year-ago levels in recent months.
