IOC Signs $1.5 Billion Deal to Buy US Crude Oil

OILMONSTER.COM- Indian Oil, country’s top refiner, has struck a $1.5 billion deal to buy oil from the US, the company said on Monday in an unusual announcement just a day before the Crown Prince of Saudi Arabia begins his India visit. 

“Indian Oil has finalised a term contract for import of up to 3 million tonnes of crude oil of US origin grades as a part of its strategy to diversify term crude sources,” the company said in a statement. “This is the first term contract finalised by any Indian PSU oil company for import of US origin crude oil grades.” 

At current prices, the year-long contract beginning April is estimated to be worth $1.5 billion although actual value would depend on timings of delivery of cargoes. The contract was finalised on February 15. 

State refiners have previously purchased US oil in spot market and Indian Oil had a mini-term deal this fiscal year but an annual purchase agreement signals a firm entry for the US into India’s suppliers club, which can have repercussions for traditional suppliers such as Saudi Arabia, Kuwait and Iraq. 

The US is the biggest producer of crude oil in the world, and in its eagerness to secure Indian market, it is increasingly offering terms that address its locational disadvantage with respect to its Middle-Eastern rivals. US supplies cut India’s dependence on Middle-East suppliers and enhance the country’s bargaining power with them. 

State refiners do not usually announce details of oil purchase deals they strike with different countries and suppliers. The announcement assumes significance coming as it has just a day ahead of Saudi Arabia Crown Prince Mohammed bin Salman’s visit to India. Saudi Arabia has been among the top suppliers to India and has keenly contested with Iraq for the top spot in recent years. 

Courtesy: www.economictimes.com