Iraq replaced Saudi Arabia as top crude supplier to India in April as refiners moved to boost their processing margins by purchasing the cheaper Basra Heavy oil grade, ship tracking and Thomson Reuters trade flow data showed.
India’s April imports from Iraq topped 1 million barrels per day (bpd) for the first time, up by about a third from March and 8 per cent from a year ago, according to ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts.
“Basra heavy is good for refineries with coker units, it is also good for conventional refiners that make bitumen as that is in demand in India. Also (the crude) is available at discounts so it is value for every dollar that we spend,” said MK Surana, chairman of Hindustan Petroleum Corp.
Indian refiners in recent years have invested heavily in modernising plants to more efficiently process low grade crudes into diesel and gasoline, helping to boost operating margins and giving greater flexibility in the oil grades they can buy.
This has allowed refiners in the third-largest oil consumer to shop around during periods of tightness, and remain profitable in a fast-growing, cost-sensitive market. India’s crude mix is highly diverse as a result, with just over 15 per cent of its flows stemming from Africa in April, nearly 13 per cent from Latin America, and most of the rest coming from the Middle East.
Saudi Arabia, usually India’s main supplier, shipped about 750,000 bpd to the South Asian nation in April, a decline of about 5 per cent from the previous month and 8 per cent from a year ago, the data showed.
With each barrel of Iraq’s Basra Heavy oil trading at roughly $2.85 less than a barrel of Saudi Arabia’s Arab Heavy mix when the deals were done, Indian importers were able to realise a substantial cost-savings by making the switch, without much impact on product output. [OSP/]
India’s lower Saudi purchases were partly due to firmer Saudi prices following the production cuts by Opec since January.
Iraq is Opec’s second-largest producer after Saudi Arabia, but so far has been resistant to an aggressive cut given its reliance on oil
revenues to fund its economy.