India is gearing up to buy its first oil from the United States, as it seeks to diversify its crude buying amid favorable price differentials.
“There will be a consignment of US crude cargoes in the next few months. We are also looking to buy some oil from Canada,” said a government source. India has bought Canadian crude twice before, buying Hibernia crude earlier this year and a cargo of White Rose in 2013.
The source added that these flows will be on a short-term contract basis, and if there is a good response he expects purchases of US and Canadian crude to rise in the coming year. He also said that these cargoes will be used by Indian state oil refiners, but would not divulge specific names.
Indian state refiners are very big buyers of light sweet crude oil, which are largely low in sulfur and yield a generous amount of diesel, jet fuel and gasoline, which are the profit-making products for global refineries.
The bulk of rising US oil output is tight oil or shale oil which is of this quality, and is very similar to Nigerian crude, of which is India is the largest buyer. Trading sources added that as a result it was not very surprising to see India buying US tight oil though freight costs from the US to India are typically not considered economical.
In addition, Indian imports of Russian Urals crude have risen this year as the key export grade shows signs of competing with some Middle Eastern sour barrels.
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