New Delhi: India's oil imports from Saudi Arabia and Iraq hit the highest in more than a decade last month as OPEC's top producers gained at the expense of Latin American crudes, a validation of the OPEC policy of maintaining output and fighting for market share.
Competitive prices and shorter shipping distances are giving the Middle East members of the Organization of the Petroleum Exporting Countries (OPEC) the upper hand in India, the world's third-largest crude oil importer.
Saudi Arabia was the top supplier to India in January, with volumes jumping 29 per cent from the same month a year ago to nearly 940,000 barrels per day (bpd), ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts showed on Friday.
Just behind was Iraq at 930,000 bpd, up 52 per cent from January levels last year. The daily rates from both were at their highest since at least 2001, according to data available on the Thomson Reuters Eikon terminal.
In contrast, total imports from Latin America fell by a quarter in January from a year ago to 706,000 bpd, the data showed.
"We are going slow in the purchase of Latin America oil and have raised supplies from the Middle East," said H. Kumar, managing director of Mangalore Refinery and Petrochemicals Ltd.
Indian refiners say they increased imports of Middle Eastern crude after Brent rose relative to the Dubai benchmark, making oil priced off the latter more attractive.
As well, on top of competitive monthly prices for its oil compared with similar grades, Iraq provides discounts that could amount to more than $1 a barrel to compensate for crude quality changes, trade sources said.
"Basra Heavy is better priced compared to any other heavy crude. Even Basra Light is better priced compared to other heavy crudes," A. K. Sharma, head of finance at Indian Oil Corp said last week.
IOC buys about 300,000 bpd of Iraqi oil, including a recently signed term deal for Basra Heavy.
Reliance Industries Ltd, owner of the world's biggest refining complex, has also entered into a long-term deal with Iraq to buy Basra Heavy, according to its website.
Indian refiners that have invested billions of dollars in upgrading their plants are scouting for cheaper heavy, sour grades such as those from Iraq and Iran to maximise gross refining margins.
"For a country like India where value of local currency is fluctuating and so are global oil markets, it's better to go for nearby markets for oil purchases than going for a parcel that takes up to two months to reach India," said Ehsan Ul-Haq, senior analyst at London-based consultancy KBC Energy Economics.
The Indian rupee is edging near a record low of 68.85 to the U.S. dollar hit in August 2013 - when India was mired in its worst currency turmoil in more than two decades.
In January, India also took just over 170,000 bpd of Iranian crude, down nearly 40 per cent from the same month last year, the data showed. Volumes from Iran are expected to surge from this month as Indian buyers start receiving barrels snapped up from Tehran soon after economic sanctions were lifted.