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Indian refiners are preparing for any scenario in case they won’t be able to import any Iranian crude oil as the United States steps up pressure on countries to bring Iranian exports down to ‘zero’.
One of the largest Iranian customers, Indian Oil Corporation (IOC), is ready for any scenario, and it has a wide basket of alternatives to ensure crude supplies, even if India stops importing Iran’s oil completely, IOC’s Chairman Sanjiv Singh told Bloomberg in an interview published on Monday.
Saudi Arabia could cover most of the current Iranian oil supplies for IOC if India and its refiners were to cut off Tehran crude intake, Singh said, adding that a narrowing spread between Brent Crude and the Dubai oil benchmark gives refiners more options to source reasonably priced crude oil.
“We have a very wide crude basket. There’s nothing we can’t procure, there’s nothing we can’t process,” Singh told Bloomberg. “So, even if Iran supplies get disrupted, the supplies to the Indian market will still continue. That’s assured.”
Last week, reports emerged that India’s oil ministry had told local refiners to get ready for a “drastic reduction or zero” oil imports from Iran, a sign that India—Tehran’s second-largest oil customer after China—is bowing to pressure from the U.S. to reduce imports from Iran.
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In the first weeks after the U.S. withdrawal from the Iran nuclear deal and the re-imposition of sanctions on Tehran, India said that it would continue to import Iranian crude despite U.S. sanctions, because India only honors sanctions imposed by the United Nations, but not ones introduced by individual countries.
In the previous round of sanctions on Iran’s oil, India was one of the few countries that continued to import Iranian oil, albeit at lower volumes because the U.S. and European sanctions at that time were choking most of the banking, shipping, and insurance processes.
This time around India could be forced to cut Iranian imports in order to protect its exposure to the U.S. financial system.
“Our alternative ready-made preference will be Iraq, Saudi Arabia and the UAE due to proximity. But a reasonable price would be the driving force while striking any new crude import deals,” an official working with an Indian refiner told S&P Global Platts on Friday.
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.