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A larger crude oil supply deal likely during Trump visit
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SME Times News Bureau | 19 Feb, 2020
India and the US may seal a larger crude oil supply deal during the
visit of President Donald Trump later this month with diplomatic sources
indicating that American oil companies are coming with offers that
would make it attractive for indian companies to increase oil imports
from US despite the longer distance and higher freight.
Sources
said big oil producers from the US are willing to step up shale oil
supplies to India by offering importing companies a discount of upto $ 5
per barrel over global benchmarks. This is expected to make US oil
attractive even over Dubai crude that makes up for most of Indian oil
imports now.
Also on the table would be freight discounts and a
higher credit period of 60-90 days to Indian importers on the lines of
what Iran used to offer India before sanctions squeezed oil supplies
from the gulf nation.
"We expect to increase oil imports from US
next fiscal and sweetened deals would help us increase the quantum of
buys. The hope is that few contracts may be signed during the visit of
US President or later next month," said an executive of PSU oil company
asking not to be named.
Another government official said that
the idea is to more than double country's oil imports from the United
States next year and contracts would be facilitated if better
concessional terms are offered.
"The shipment of US oil to India
has already increased over the past two years and we may end up
importing close to 10 million tonnes (mt) in the current fiscal year.
This would be doubled in FY21 if official and company-level negotiations
taking place for some time yield positive results," said the official.
If
this level of oil imports is doubled in FY21, the US will reach close
to meeting India's 10 per cent oil import needs, the same what Iran was
meeting prior to the supply squeeze post sanctions.
In the
current fiscal (FY20), oil imports from Iran have dipped to 1.97 mt,
down from 23.9 mt in FY19. Iran used to meet more than 10 per cent of
country's total oil imports.
But since last fiscal, the Iran oil
squeeze is being compensated through higher supplies by Iraq, the UAE
and Saudi Arabia. During the period, imports of US oil have also
increased to 6.2 mt in FY19 from a level of mere 1.9 mt in the previous
year. In the April-December period of this fiscal, import of US oil has
already crossed last year's import figures.
Diplomatic sources
said the talks between Indian and US officials on increased oil support
by US has progressed smoothly since last year during Prime Minister
Modi's US visit. In fact, the 'Howdy Modi!' event was also used to
negotiate possible deals with US oil companies to meet the growing needs
of world's third biggest oil importer. That time too, the US had
indicated its intent of supplying increased quantities of oil and gas to
India on a short notice to prevent the country from facing any
shortages.
Though Indian oil companies have started importing oil
from the US for the past couple of years, the quantity remains
miniscule, forming just about 3 per cent of the country's total oil
imports. But the quantity can grow with US shale oil market becoming
relevant again at current crude levels and an increase in total rig
count again in December-January period in the world's largest
oil-guzzling nation.
"The rig count in the US had slowed in the
second half of FY20 but has again picked up in last few weeks. The
domestic rig count will be largely stable, at least through the first
six months of the year, as companies spend their drilling budgets for
the year and prepare the field to quickly execute on their budgets for
the first half of the new year. This would make higher quantities of US
oil for exports," said an oil sector analyst who did not wish to be
named.
India's shift to US would not be sudden as gas
transportation company GAIL, oil marketing firm Bharat Petroleum
Corporation Ltd (BPCL) and country's largest oil refiner Indian Oil
Corporation, have sealed deals for supplies of the US crude earlier as
well. The shale oil price there has also become very competitive in
comparison to Middle-East and Gulf crude.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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