According to the shipping data, Iran overtook Saudi Arabia to become India’s top oil supplier in October. Generally, Iran used to be the second biggest oil supplier of India. But with Western sanctions over its nuclear development, its position was occupied by Iraq. Now, with the lifting of sanctions in January, India’s imports from Iran have shot up. In the month of October, it increased threefold rising to 7,89,000 barrels per day (bpd), compared to Saudi Arabia’s supply of 6,79,000 bpd. However, if the whole period of January to October is taken into account, then Saudi Arabia is still India’s top supplier of oil.
Reasons
- Saudi Arabia has increased its capacity to refine oil instead of exporting just crude. So, it exports less crude oil. Whereas Iran is in a better position to increase its output and sales to India. This has made Iran to occupy the top spot.
- Iran’s price discounts have attracted India to buy more oil from it. India bought 2 million barrels of Iranian crude for the strategic petroleum reserves (SPR) stocks. Another 4 million barrels is expected to be delivered soon.
- Refiners like Reliance Industries Ltd, which is the operator of world’s biggest refinery complex at Jamnagar had previously stopped buying Iranian crude oil due to the Western sanctions. Now, with the lifting of sanctions, it has again started to buy Iranian crude oil in significant quantity.
Implications
The Organization of the Petroleum Exporting Countries (OPEC) is expected to finalize a production cut to boost prices of oil which have fallen below $50 per barrel due to oversupply. Exemptions from planned cuts have been given to conflict-torn Libya and Nigeria. In addition, there is a proposal to grant exemptions to sanctions-hit Iran. But, grabbing the top position to supply oil to India (world’s third biggest importer of oil) from de-facto OPEC leader Saudi Arabia even for only one month is likely to make it difficult for Iran to defend granting of exemptions.