India is witnessing a dramatic surge in US crude inflows and volumes could rise further as refiners look to seal long-term and spot deals to ensure steady supplies and cushion the impact from any potential disruption because of rising geopolitical tensions, analysts told S&P Global Platts. India’s voracious appetite for US crude is already visible in the latest numbers from the US Energy Information Administration. The country imported 263,000 b/d of US crude in Q1 2019, an eightfold jump from as low as 33,000 b/d in Q1 2018. Inflows so far this year have also been more than doubling the 2018 average of 131,000 b/d.
“India had already hiked imports from the US this year and we expect this will go even higher, particularly with the absence of Iranian crudes and as China reduces its US crude oil intake significantly because of trade tensions,” said Kang Wu, head of Asia analytics at S&P Global Platts Analytics.
Senthil Kumaran, a consultant at Facts Global Energy, estimated that India could end up 2019 with average US crude imports of as high as 190,000 b/d. “As the US has taken a harder stance on Iran and Venezuela, Indian refiners are more exposed. While US barrels are no one-to-one match for the Middle East and Latin American grades, Indian refiners will still have to take more US inflows. This is because the bulk of the incremental crude production for the next few years will happen in the United States,” he added.
Kumaran said while state-run refiners like Indian Oil Corp. would aim to raise term volumes for US crude and possibly roll over their term contracts to the next fiscal year, private refiners like Reliance would buy more spot US cargoes. “Of course arbitrage will be the deciding factor but we will see US crude volumes growing at an even faster rate,” he said.
Even other state-owned refiners like Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd. might look towards term contracts for US crude this year, but for relatively smaller volumes, he added.