India set to pay for Iranian oil using rupees

The sources said India has selected UCO Bank and IDBI Bank for facilitating payment to Iran. (File/AFP)
Updated 20 September 2018
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India set to pay for Iranian oil using rupees

  • Sources said India has selected UCO Bank and IDBI Bank for facilitating payment to Iran
  • India, Iran's top oil client after China, is still seeking some exemptions to the sanctions from the US

NEW DELHI: India will settle payments for Iranian oil using rupees through local banks starting in November as US sanctions will make it difficult to settle trades through European banks, two industry sources said on Thursday.

In May, US President Donald Trump withdrew from a 2015 nuclear accord with Iran and ordered the renewal of US sanctions. Some sanctions took effect from Aug. 6 while those affecting the oil and banking sectors will start from Nov. 4.

"We are bracing up for any eventuality we have to make a payment and we don't want to default on making payments," one of the sources said.

The sources said India has selected UCO Bank and IDBI Bank for facilitating payment to Iran.

Indian refiners are currently using State Bank of India and Germany-based Europaeisch-Iranische Handelsbank AG to buy Iranian oil in euros. SBI has told refiners it would stop handling Iran payments from November.

The second source said after the United States announced it would re-impose sanctions in May, Iran has already received payments for some cargoes in rupees.

Reuters in June reported that India is looking to revive the its earlier rupee payment mechanism with Iran. During the previous sanctions regime, India adopted a barter-like scheme to buy oil from Iran while the Middle Eastern country used rupees to import goods from India.

"Previously we settled 45 percent of our trade in rupees this time it could be 100 percent. We have to mutually decide the number," said the first source.

India, Iran's top oil client after China, is still seeking some exemptions to the sanctions from the US though some refiners have already curtailed purchases because of insurance issues tied to the sanctions.

IDBI did not respond to requests for a comment while UCO Bank's Managing Director R. K. Takkar did not respond to phone calls seeking comment.


Oil prices fall as US crude output hits record

Updated 22 min 48 sec ago
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Oil prices fall as US crude output hits record

  • US crude oil production reached 12 million barrels per day for the first time last week
  • As output surges, US oil stocks are also rising

SINGAPORE: Oil prices fell on Friday after the United States reported its crude output hit a record 12 million barrels per day (bpd), undermining efforts by Middle East-dominated producer club OPEC to withhold supply and tighten global markets.
International Brent crude futures were at $66.87 per barrel at 0326 GMT, down 20 cents, or 0.3 percent, from their last close.
US West Texas Intermediate (WTI) crude oil futures were at $56.84 per barrel, down 12 cents, or 0.2 percent, from their last settlement.
US crude oil production reached 12 million bpd for the first time last week, the Energy Information Administration (EIA) said on Thursday in a weekly report.
That means US crude output has soared by almost 2.5 million bpd since the start of 2018, and by a whopping 5 million bpd since 2013. America is the only country to ever reach 12 million bpd of production.
As output surges, US oil stocks are also rising.
US commercial crude oil inventories rose by 3.7 million barrels to 454.5 million barrels in the week ended Feb. 15, the EIA said.
Analysts say US output will rise further and that oil firms will export more oil to sell off surplus stocks.
“We see total US crude production hitting 13 million bpd by year-end, with 2019 averaging 12.5 million bpd,” US bank Citi said following the release of the EIA report.
Of that, the bank said, “we could be seeing some weeks with 4.6 million bpd of gross crude exports by end-year, adding to this week’s new record” of 3.6 million bpd.
Friday’s dips at least temporarily halted a rally that pushed crude prices this week to their highest for 2019 so far amid the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC and some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million bpd to prevent a large supply overhang from growing.
Another recent price driver has been US sanctions against oil exporters Iran and Venezuela.