Indian Oil Corp has halved its term oil import deal with Kuwait to 100,000 barrels per day (bpd) as the refiner cuts its dependence on long-term purchases in favour of cheaper spot deals, a source with knowledge of the deal said.
Kuwait was the second-biggest supplier of oil to India's biggest refiner in the fiscal year ended March 31 after Iraq, according to the source.
For 2015/16, Indian Oil Corp has reduced its contract with state oil firm Kuwait Petroleum Corp to take advantage of better grades available at cheaper rates.
"Through tenders, IOC is getting better grades such as those from West Africa at cheaper rates," said the source on condition of anonymity as he is not authorised to speak to media.
An email sent to the CEO's office at Kuwait Petroleum Corp seeking a comment remained unanswered, while IOC's head of refineries Sanjiv Singh declined to comment on the issue. IOC Chairman B. Ashok told Reuters last week the refiner would cut its overall term import volumes by 10 percentage points to 70 percent of its needs in the current fiscal year.
Ashok said the firm was "looking at opportunity crudes" and wanted the right balance of term and spot because crude accounted for such a large amount of its expenditure. He said IOC has started buying oil from "not so conventional sources" and expanded its oil basket to 174 crudes in the last fiscal year, when it processed 14 new grades including those from Latin America and Canada.
It recently bought a cargo of Russian Urals. Indian refiners traditionally buy high-sulphur oil via term deals but a global supply glut amid rising production of U.S. shale oil has led them to tap the spot market for heavy grades.
An Asian oil trader said that with the global market well supplied, IOC was regularly in the spot market seeking high-sulphur grades.
India, the world's fourth-largest oil consumer, imports about 80 percent of its oil needs with its import bill hitting $112.75 billion in 2014/15, down about a fifth due to falling oil prices.
Kuwait's official selling price for its crude sales to Asian buyers for June was set at a $2.35 a barrel discount of Oman/Dubai quotes. Kuwait's crude price formula is loosely linked to that of Saudi Arabia's Arab Medium grade.
IOC directly controls 1.38 million bpd refining capacity, including the recently commissioned 300,000 bpd Paradip refinery in east coast. It aims to process 10 percent more oil, or about 1.18 million bpd in 2015/16.
Courtesy of Reuters