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Saudi Aramco offers to increase oil supply to India by 200,000 barrels a day

May 11,2019

It is reported that the world's largest oil company Aramco will provide additional crude oil to domestic oil refiners to meet shortages arising from the US decision to lift Iran sanction waivers from major oil importing countries, including India. The Saudi Arabian oil giant has offered to increase crude oil supplies to India by 200,000 barrels a day that would meet almost half of the country's oil imports that was coming from Iran.

 

On an annual basis, 200,000 barrels a day of oil equals about 10 million tonnes of oil per year. India imported 23.9 million tonnes of crude oil from Iran in FY19, making the Gulf country the third biggest exporter of oil after Iraq and Saudi Arabia.

 

Aramco's offer to Indian oil companies is for deliveries starting June. The oil situation is also expected to get clearer from June when the full might of US sanctions would come into play. Though US sanction waiver was lifted from May 2, India is still getting some oil from Iran on contracts reached earlier.

 

While the Saudi Aramco’s offer of increased oil quantity has generally been welcomed by domestic oil companies as it will help alleviate the squeeze driven by US sanctions on Iran and Venezuela, the supply is unlikely to be made on terms given by Iran. In fact, refiners would face a burdensome bill on Arab light crude.

 

Iran used to offer Indian refiners 60-day credit for oil deliveries and also gave discounts on freight and insurance. Saudi Arabia, on the other hand, charges an Asian premium for its crude oil exports to India. It is for this reason that India has been expanding the list of oil source markets to prevent disruptions in one part of the world from affecting its supplies.