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With global crude prices remaining below $75 in September so far, oil marketing companies (OMCs) have placed spot orders for crude from traditional West Asia suppliers such as Iraq, and United Arab Emirates (UAE), industry insiders said.
Currently, most of the orders are being planned for deliveries over the next 2-3 months, they added.
“Lower prices have given us an opportunity to replenish volumes. While all major studies show prices not rising by a large margin in the short term, it is always a good idea to be prepared with enough inventory first,” an official from a state-run refiner said.
Global crude prices have fallen every month since April, when they had breached the $90 per barrel level.
Last week, benchmark Brent crude futures prices fell to a 33-month low of $69 per barrel. This was over weak demand and concerns of oversupply. On Monday, Brent crude futures stood at $72.9 per barrel at the time of writing this report.
While most of the crude from West Asia is usually purchased on term contracts, spot purchase allows refineries to secure different grades of oil, otherwise unavailable, another official from a state-run refiner said.
The series of Basrah crude export grades originating in Iraq are attractive for upgraded Indian refineries. They are also of great value for production of items such as diesel.
As part of a long planned overhaul of its crude grades, Iraq has over the past year increased the availability of Basrah Medium and Basrah Heavy — relatively cheaper than Basrah Light — that are suited for India’s upgraded plants.
In May, Business Standard had reported crude oil purchases in Q1 FY25 would remain tilted towards Russia if Brent crude prices remain above $81 per barrel.
However, industry sources had then said it may swing towards crude from Iraq and the UAE if prices fall beyond that level, even for a few days.
In Q1, Brent crude futures prices dipped below the $81 level for a week.
As a result, data from the commerce department shows flows from Iraq, Saudi Arabia, UAE, Kuwait, Qatar and Oman rising to $18.56 billion in the first quarter of FY25.
This constitutes 45.9 per cent of all crude imports during the quarter. It is slightly up from 44.89 per cent in the same quarter of the preceding year.
Even without the price argument, officials feel a stable supply of crude oil should be established from outside the West Asian region. This will create alternative mechanisms at a time when crude flows often turn volatile.
Spot purchase has steadily been rising over the past few years. It reached 35.13 per cent of all oil imports in 2022-23, up from 27.58 per cent in 2017-18.
However, Russia remains the largest source of crude for India for more than a year.
In August, oil imports from Russia stood at 1.8 million barrels per day (bpd), according to data from commodity market analytics firm Kpler.
First Published: Sep 16 2024 | 8:57 PM IS
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