New Delhi India’s state refiners are planning to lock up more of their crude supplies in time contracts, worried that tighter Western sanctions against Russia, including from the European Union, could curb supplies in tighter markets in the future.
Indian Oil Corp, the country’s top refiner, and Bharat Petroleum Corp are seeking tenure agreements with countries including the United States, industry sources said.
“We are preparing a back-up plan. If the world is uncertain because of the conflict between Russia and Ukraine, all options should be open,” said a state refinery official.
The shift to contracts reflects a shift in refiners’ purchasing strategy aimed at increasing spot purchases when supplies were plentiful in previous years.
“Due to the conflict between Russia and Ukraine, oil markets may be tight and we expect most of the Middle East crude flows to meet the needs of the European market, so we need to increase our oil sources,” said a source from another country. Inquisitor.
India’s reliance on spot purchases has allowed Indian refiners to withdraw offers for Russian oil that were banned by some Western buyers in February following Moscow’s invasion of Ukraine.
India has rarely neglected to buy Russian oil, becoming Moscow’s second-largest oil customer after China.
But the EU’s ban on Russian crude from December 5 will force European refiners to buy more Middle Eastern oil, putting them in competition with Asian buyers.
To secure supplies, the IOC last month signed the first six-month oil import agreements with Brazil’s Petrobras for 12 million barrels and Colombia’s Ecopetrol for 6 million barrels.
BPCL has signed an initial contract with Petrobras to expand oil wells.
Under the two agreements, supplies to the IOC will begin from October, according to multiple sources familiar with the matter. IOC is looking for more short-term supplies, including US oil contracts, he added.
The IOC already has an annual agreement to buy 18 million barrels of US oil. Of this, IOC has so far purchased 12 million barrels, he said.
Sources said that BPCL, which has increased its oil purchases from the US, is looking for more contracts.
IOC and BPCL did not respond to Reuters’ requests for comment. Ecopetrol could not be reached for comments outside business hours.
Western countries have imposed heavy sanctions on Russia, and the Group of Seven countries, led by the United States, are planning to impose price limits on Russian oil exports through insurers to cut revenues. It is unclear whether the plan will succeed and Russia will cut off supplies, the sources said.
“There are a lot of uncertainties … so we think we should at least tie up with a lot of suppliers,” the second source said.
India has called for an end to the offensive in Ukraine but has refrained from directly condemning Russia, with whom it has long-standing political and security ties.
Prashant Vasisht, vice president of rating agency ICRA Limited, said: “Signing a contract is the best option to protect yourself from future cuts, such as from Middle East oil transfers to Europe, and to secure preferential pricing and stable supplies. “