India not rushing to buy extra Saudi oil to offset lost Iranian supply

Just one Indian refiner has agreed to buy additional crude oil supply from Saudi Arabia to compensate for the loss of Iranian barrels, as India’s firms have been looking for months to diversify their crude sources.

Mangalore Refinery and Petrochemicals (MRPL) is the only Indian refiner out of four state-held companies that had bought Iranian oil under the sanction waivers to have taken up the Saudi offer for additional crude supplies, and will lift around two million barrels in June on top of its normal purchase of 2.5 million barrels, industry sources told Reuters on Monday.

Under its exemption from the US sanctions on Iran that ended at the beginning of May, India was allowed to buy some 300,000 bpd of Iranian oil.

Now that the waivers are over, just one of the four Indian refiners has requested more Saudi oil for June, according to Reuters’ sources. There are two key reasons for the lukewarm reception of the extra Saudi supply—high Saudi official selling prices (OSPs) for its Asian customers for June, and the greater diversification of the Indian refiners who are looking to other suppliers from the Middle East and to other countries, including Mexico, Brazil, and the United States.

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India’s four state-held oil refiners who were Iranian customers until last month have been diversifying suppliers to offset possible tighter U.S. sanctions on Iranian oil, and all four were certain that they won’t have trouble replacing any loss of Iran’s oil with more supplies from the Arab Gulf OPEC members, from Mexico, and the US, company officials told Reuters before the US announced the end of all sanction waivers for Iranian customers.

“In our system, UAE and Iraq oil turned out to be better than Saudi oil,” a source at an Indian refinery told Reuters.

Earlier this month, American officials said that the United States was working with oil producers like Saudi Arabia and the UAE to ensure India has enough crude supply after the end of the sanction waivers, but the US can’t ensure its own oil will be sold to India at preferential prices.

This article was originally published on Oilprice.com