Indian refiners plan to buy less oil from the Middle East in the coming months as OPEC+’s supply restrictions make United States crude more attractive. Strong gasoline demand due to people favoring private vehicles amid the Covid-19 pandemic and a slower recovery in diesel is also giving low-sulfur American grades an edge over heavier and more sour Middle Eastern varieties. Indian state-run refiners including Indian Oil Corp., the country’s biggest crude processor, are planning to cut purchases from Saudi Arabia in May, and buy more from the U.S. and on the spot market. IOC has floated a spot tender seeking crude from West Africa, the Middle East, the United States, and Canada for April-May loading.
Indian crude purchases from Saudi Arabia dropped 36% in January from the previous month, while United States imports more than doubled, government data show. Reuters reported earlier that Indian state-run refiners planned to cut purchases from the kingdom by a quarter to about 10.8 million barrels in May. Around 86% of Indian oil imports last year were from OPEC+ members, with 19% coming from Saudi Arabia, according to government data. New Delhi has repeatedly called for OPEC+ to pump more crude to stop prices from rising too high, but its pleas have fallen on deaf ears with Riyadh extending its supply cuts and raising premiums for its crude.
This is great news for the United States. The United States oil demand was weak and refineries were running at low rates so the United States crude had to go somewhere, and Asia is the region that has seen rapid demand recovery since the beginning of the Covid-19 pandemic. Plus, China has not been taking United States oil because of the trade problem, so India is the obvious choice. And because of this, the United States has now overtaken Saudi Arabia as India’s second-biggest oil supplier after Iraq last month.