Oil in Global Economy Series: Indian Government gives approval to Indian Oil Corporation to import US crude oil

The Indian government has approved a plan proposed by Indian oil to import U.S. crude every month. India’s biggest refiner has received permission to import one VLCC (Very Large Crude Carrier) every month for the year 2017. This marks a great achievement not only for the United States but for the oil refiner too as it was not allowed to import crude via VLCC before for a prolonged period. India allows crude imports only via domestic carriers, none of which owns VLCC. But as US crude imports need VLCC, Indian oil has been allowed to use one foreign owned VLCC every month.

Last month, Indian oil became the first Indian refiner to begin importing crude oil as it purchased 1.6 million barrels of U.S. crude. Another large refiner, Bharat petroleum soon followed suit and ordered 0.5 million barrels worth of Mars and Poseidon crude. And just a few days ago, Bharat Petroleum ordered 1 million barrels of US sweet crude (low sulfur) and became the first Indian refiner to try US sweet crude.

The move shows,

• The traditional sellers of crude oil to India (which are largely from the Middle East) are in for tough competition.
• It also shows that even accounting for the journey and freight rate, U.S. crude remains competitive to Middle East crude.

The latest reports suggest that another large Indian refiner HPCL is also considering buying US crude this year.