India may face oil shock after US action

India may increase import of oil from Mexico, Saudi Arabia, Kuwait and United Arab Emirates, among other sources, to offset loss of Iranian oil in the wake of US decision that eight countries (including India) will no longer be exempt from penalties if they continue to import Iranian oil. Their sanctions waivers expire on May 2. Iranian oil accounted for 10 per cent of Indian crude imports of about 229 million tonnes in 2018-19.

With this market closing completely under US pressure, India could face severe shortages if alternative arrangements are not made quickly.

“Brent crude oil prices rose 1.86 per cent to a 4-month high at USD 73.83 per barrel after reports that the US is planning to announce that buyers of Iran oil need to end imports soon or face sanctions. Due to this, we expect Brent crude oil price may test USD 78 to USD 80 per barrel,” said Anuj Gupta, DVP Commodities & Currencies Research, Angel Broking.

The US had late last year granted eight countries - China, India, Japan, South Korea, Italy, Greece, Turkey and Taiwan - a 180-day waiver to continue to buy Iranian crude despite its sanctions with a condition that they reduce purchases and eventually end imports.

However, a few analysts said that the oil market is in general under stress due to disruptions on three fronts, Venezuela, Libya and now Iran. While Libya has still maintained its oil supply, Venezuela’s export is shrinking. Despite the recent tension in Iran, oil is a commodity and will be adequately replaced, analysts said. “The Government of India has put in place a robust plan to ensure that there is adequate supply of crude oil to Indian oil refineries from May 2019 onwards.

There will be additional supplies from other major oil producing countries from different parts of the world,” according to Ministry of Petroleum and Natural Gas.

India, the second biggest purchaser of Iranian oil after China, has restricted its monthly purchase to 258,000 barrels of oil a day in March 2019. Overall imports amounted to 23.5 million tonnes in 2018-19. Iranian oil is a lucrative buy for refiners as it provides 60 days of credit for purchases, terms not available from suppliers of substitute crudes -- Saudi Arabia, Kuwait, Iraq, Nigeria and the US. (IANS)