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Indian Oil Corp., the country’s largest oil refiner, has signed its first annual contract for deliveries of crude oil from the United States, Reuters reports, citing a statement by the company’s chairman.
IOC will buy an average of 60,000 bpd for a total price of US$1.5 billion in the year to March 2020. The seller is Norway’s Equinor. Previously, Indian Oil Corp. had only bought U.S. crude on the spot market. Last year, Reuters recalls, the company bought 6 million barrels of U.S. crude under a mini-term deal for the period November to January this year.
Most of the oil the refiner imports, however, comes from OPEC under long-term deals, at 75 percent. While this has been the traditional approach, now the company wants to diversify its sources of the commodity, especially in light of the increasingly difficult geopolitical situation.
“Lots of geopolitical issues are going around. We expect lots of volume going away from Venezuela, west Africa and Iran, so it makes sense to have guaranteed term supplies from the U.S., where crude production is increasing,” FGE analyst Sri Paravaikkarasu told Reuters.
However, right now India is taking more oil from Venezuela. This month, the country became the largest importer of Venezuelan crude, receiving it at a daily rate of over 600,000 bpd over the first two weeks of February, or up 66 percent from a month ago. The biggest buyers of Venezuelan crude were Reliance Industries and Nyara Energy, in which Rosneft holds a 49-percent stake.
Crude oil source diversification is particularly important for India, which is one of the biggest drivers for global oil demand growth. Last month, Wood Mackenzie forecast India’s oil demand will this year continue growing at a rate of 245,000 bpd, the same as last year, when it accounted for 14 percent of global growth.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.