The world's third-largest crude oil importer, India, has been sourcing more and more oil in spot deals with exporters outside of the Middle East after the biggest OPEC producers have tightened global crude supply as part of the OPEC+ pact.
OPEC still accounts for most of the oil shipped to India, which depends on imports for around 80 percent of its petroleum consumption.
However, in recent months, Indian refiners have boosted imports from exporters such as the United States and West African OPEC producer Nigeria as OPEC's Middle Eastern giants Saudi Arabia and Iraq have been limiting term supplies to customers, including customers in Asia.
India's oil consumption has mostly recovered from the pandemic shock last year, and domestic refiners are looking to maximize gasoline production. With reduced supply from the Middle East, Indian refiners have increased purchases of lighter crudes such as those from the U.S. and Nigeria, which yield more gasoline, according to Bloomberg data.
This year, India's spot crude imports are set to increase by up to 15 percent compared to 2020, industry consultancy FGE told Bloomberg.
India's crude oil imports surged in December 2020 to their highest in almost three years, while fuel demand posted its fourth consecutive monthly rise in December to the highest since February 2020.
At the same time, Saudi Arabia is cutting its oil production by an extra 1 million barrels per day (bpd) this month and next, while Iraq has reportedly reduced its term supplies for 2021 to several major Indian refiners by 10-20 percent.
Indian refiners are raising the share of spot purchases in their overall basket of sourcing oil supply, but the oil price rally in recent weeks is not great news for Indian buyers of oil.
Earlier this month, India's Petroleum Minister Dharmendra Pradhan warned that higher oil prices could interfere with global economic recovery in the latest signal that one of the world's biggest drivers of oil demand growth is unhappy with where prices are going.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More