The Indian Oil Corporation is likely to sign up for term deals with myriad oil producers in the U.S. for purchasing approximately 1 million tons of crude oil each year. The strategic decision is projected to transform the U.S. into one of the firm’s regular crude oil suppliers. Reportedly, last year, Indian refiners started buying crude oil from the U.S in the spot market.
Industry experts have speculated that if IOC’s term deal goes through, it will be marked as the firm’s first regular supply agreement with the U.S. AK Sharma, Director at IOC, clarified the progress of the term deals, stating that the firm is exploring term agreements with the U.S. for crude oil imports after having dealt with spot cargoes already.
For the uninitiated, term agreements are generally yearly contracts for the purchase of predetermined quantity at dynamic pricing that changes with global rates during the contract span. Sources cite that IOC & other government controlled refineries in India import approximately 70% of crude oil by signing term agreements with many dealers in the oil-producing nations. These refineries procure the rest of the 30% of the crude oil from the spot market.
In 2015, the U.S. lifted a forty-year-old ban on crude oil exports, post which post which IOC commenced taking U.S. crude. The decision has benefitted other Indian refiners including Hindustan Petroleum and Bharat Petroleum as well, both of which began buying crude oil from U.S. in 2017. For the record, so far, Indian Oil Corporation has signed pacts with U.S. oil suppliers for purchasing 10 million barrels of crude oil from the spot market. Approximately 60% of crude oil has already been dispatched to IOC.
The U.S. has been promoting its oil & gas exports with multiple oil suppliers in the country trying to provide oil at competitive price to Asian buyers such as India. Industry experts claim the U.S. crude oil suppliers to be better alternative for Indian refiners over Gulf oil producing countries charging higher prices.