Hint of more US crude buy
A bear market in crude has opened up the possibility of more long-term purchases from the US at a discounted price that will counter the over-dependence on the Gulf countries.
- Published 20.10.17
New Delhi: A bear market in crude has opened up the possibility of more long-term purchases from the US at a discounted price that will counter the over-dependence on the Gulf countries.
"If we get the crude at a discounted rate, long-term contract with the US could be considered. However, this would not immediately shift the dependence on Opec nations in the immediate- or medium-term," oil industry sources said. They said the government has been encouraging the industry to diversify its crude procurement as part of the country's energy security strategy.
Sources said the first shipment of US crude which reached IOC's Paradip refinery was $2 per barrel less than the Dubai benchmark crude.
IOC officials said "that is a huge gain for oil refiners as crude is the biggest cost and any savings would help the bottom line".
The country is largely dependent on Opec which contributes 86 per cent to the domestic demand. However, as oil continues to be in a bear market, India is set to seek a discount with traditional suppliers. The country's state-owned refiners have already placed a cumulative order of 7.85 million barrels from the US. This is set to increase in the coming months, if they get crude at a competitive price.
Analysts said persistent over-supply has turned crude into a buyer's market, curtailing the ability of Opec to influence pricing by adjusting supplies. Recent efforts at cutting output by Opec has also failed to prop up prices as US shale producers are continuously adding more output.
Price projections by analysts indicate crude oil would average about $51 per barrel in 2017 and would increase to $52 per barrel in 2018.
The US is expected to increase exports from 9.3 million barrels per day (mbd) in 2017 to 9.9 mbd in 2018, reports said. The crude being imported from the US is similar to Gulf crude.
However, analysts cautioned that the country cannot ignore Gulf crude as changes in the geo-political situation could raise prices and make the high transportation cost of the US crude uneconomical.