Cheaper options knock Gulf's oil import share

New Delhi/Singapore: India’s reliance on West Asia oil imports shrunk in June to the smallest since October 2015 as the world’s third-biggest importer tapped other sources amid Opec supply cuts, ship tracking data from industry sources and data available on Thomson Reuters Eikon showed.

West Asian imports fell 7.6 per cent in June from the previous month, partly driven by declines from Kuwait, Iraq and Saudi Arabia as the production cuts by the Organization of the Petroleum Exporting Countries (Opec) made more of a dent in supply.

The cuts also drove up West Asian crude prices, prompting price-sensitive Indian buyers to seek substitutes from Russia and Latin America as the world remains awash with oil.

Gulf crude accounted for about 58.5 per cent of the imports compared with about 66 per cent in May, while the share of oil from Latin America, Africa, and Central Asia, including Russia, rose, according to ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts.

“The choices have increased and crude is available at competitive prices,” said M.K. Surana, chairman of oil refiner Hindustan Petroleum. “There are high supplies of low-sulphur crude because Nigeria is exempted” from the Opec cuts, he said.

Even as Opec and some non-Opec producers cut output to shore up prices, global oil output in June is 1.2 million barrels per day above a year ago, the International Energy Agency said in its report.

The weight of supplies has forced sellers to cut prices allowing Indian refiners to snap up cargoes in the spot market.

“Pricing pressure is playing a role, whoever has crude they want to dispose it as quickly as possible,” said A.K. Sharma, head of finance at Indian Oil.

The refiner last week bought the country’s first crude cargo from the US and increased imports of Russian Urals crude this year.

Bharat Petroleum could buy US light crude in a tender on Friday as they are priced competitively against African oil, the company’s head of refineries Mr Ramachandran said. HPCL is evaluating US crude for its refineries, Mr Surana said.

West Texas Intermediate oil prices are depressed relative to West Asian benchmark Dubai because of rising US shale oil production and as the Opec cuts have reduced the amount of West Asia medium, sour crude. This has made it feasible for India to buy heavier US crude to replace West Asia supplies such as Iraq’s Basra Light, IOC’s Mr Sharma said.

Import market: West Asian imports fell 7.6% in June from the previous month, partly driven by declines from Kuwait, Iraq and Saudi Arabia as the cuts made more of a dent in supply