NEW DELHI: Indian imports of Middle Eastern oil plunged to a four-year low in 2019, tanker data shows, as the energy-hungry nation diversifies its supplies to cut costs and shield itself from geopolitical tensions.
India, the world’s third-biggest oil consumer, imports about 84 percent of its oil needs and traditionally relies on the Middle East for the majority of its supplies. However, the region’s share of India’s crude shrank to 60 percent last year — down from 65 percent a year ago and the lowest since 2015 — as record output from the US and elsewhere offered opportunities for importers to tap other sources.
India shipped in 2.68 million barrels per day (bpd) oil from the Middle East in 2019, down about 10 percent from 2018, and around 1.8 million bpd from elsewhere, the data reviewed by Reuters showed.
Deeper than expected oil output cuts by OPEC and allies, shouldered by Saudi Arabia, and less supply from Iran due to US sanctions also dented India’s intake of Middle Eastern oil, said Ehsan Ul Haq, analyst with Refinitiv.
Last year, sanctions and output cuts by OPEC and its allies, known as OPEC+, reduced the group’s supplies by 1.9 million bpd from 2018, while non-OPEC supply rose by 2 million bpd, the International Energy Agency said in its latest report. The IEA forecast that producers outside the OPEC+ pact would increase supplies by 2.1 million bpd in 2020.
India is working to diversify its oil supply sources to cut dependence on the Middle East, Oil Minister Dharmendra Pradhan said last week.
The drive to expand crude sources also reflects a push by Prime Minister Narendra Modi to bolster ties with countries such as Russia and the US.
India’s overall oil imports in 2019 fell by about 2.1 percent to 4.48 million bpd, the data showed, because most refiners temporarily shut processing units for upgrades ahead of new fuel standards in 2020. India is migrating to Euro VI compliant fuel from April 1.
Imports from CIS (former Soviet Union) nations rose in 2019 by about 65 percent to 171,000 bpd, the data showed. Intake of African grades rose by 7.3 percent to about 713,000 bpd, while US supplies was up by about 63 percent to 181,000 bpd. US oil accounted for about 4 percent of India’s overall imports in 2019, up from just 2.5 percent a year earlier.
Demand for heavy Middle Eastern grades was also affected by a shift in bunker fuel specifications from January, following new rules promoting lower sulfur fuels.
“Most Middle Eastern grades yield high sulfur fuel oil (HSFO) and because of new marine fuel norms, refiners are buying more from other producers to cut production of HSFO and increase output of very low sulfur fuel oil,” Haq said.