India May Not Buy Much Crude From Iran During Sanctions’ Waiver Period
“In what remains a highly uncertain and fluid environment, we do not expect the waiver to prompt India to purchase meaningful volumes of Iranian crude. This is consistent with India's behaviour during the last temporary US waiver on Iranian oil, when Indian refiners bought only two cargoes and did not engage in incremental purchasing due to a range of operational and commercial constraints,” Kpler said in a report
Chennai: Indian refiners are not likely to buy ‘meaningful volumes’ of crude from Iran during the current sanctions’ waiver. If the waiver extends beyond 60 days, India may move more aggressively to fill any gap. Till then, it will continue to buy from Russia, Middle East and Venezuela, finds Kpler.
“In what remains a highly uncertain and fluid environment, we do not expect the waiver to prompt India to purchase meaningful volumes of Iranian crude. This is consistent with India's behaviour during the last temporary US waiver on Iranian oil, when Indian refiners bought only two cargoes and did not engage in incremental purchasing due to a range of operational and commercial constraints,” Kpler said in a report.
Indian refiners, finalizing procurement for late-August and September, are relying on Russia, Saudi Arabia, UAE as well as partly from Venezuela.
However, if the US–Iran interim deal allows for negotiations to extend beyond the initial 60-day period and further extension of the sanctions’ waivers, India may move more aggressively to fill any gap, given that Indian refineries were largely configured to process Iranian crude. The combination of shorter sailing distances and elevated freight rates makes Iranian barrels structurally more attractive than longer-haul alternatives.
Adding a political dimension to it, stepping up Iranian imports would allow India to demonstrate again that it is distancing itself from sanctioned Russian oil in favour of non-sanctioned Middle Eastern and Iranian supply.
During the 60-day period, China will be the largest buyer of Iranian oil. If Iranian oil remains unsanctioned after these two months, increased interest from non-Chinese buyers is expected. India would likely be the first to re-engage, followed by refiners in Japan, South Korea, and the Mediterranean.
Iranian crude sitting in floating storage will likely prove attractive to Asian buyers once the 60-day waiver lapses. Iranian crude would command higher prices and medium sour crude differentials more broadly would come under pressure.
Meanwhile, refinery throughput in Asia, excluding China, has already recovered to almost 90 per cent of pre-war levels, leaving limited room for further gains, while inventory replenishment demand is likely to take time to materialize.
The reopening of the Strait of Hormuz could immediately release 93 million barrels of stranded non-Iranian crude. Further, the lifting of the US blockade on Iranian crude could release a further 72 million barrels of Iranian cargoes currently held west of Chabahar, while any eventual sanction waivers could facilitate Iranian exports beyond current levels.
Provided there are no restrictions from the Iranian side, the backlog could be cleared within roughly 10–15 days. Of these cargoes, 42.5 mb are Saudi, 18.4 mb are UAE-origin, and 15 mb are Iraqi crude.