NEW DELHI: Indian Oil Corporation (IOC) is exploring term deals with producers in the United States (US) for purchase of about a million tonnes of crude oil, a move that could turn the US into one of its regular suppliers and counterbalance traditional producers in the Gulf. Indian refiners began buying US crude in the spot market last year and IOC’s term deal, when it happens, will be the first regular supply deal with the US.
“We are already taking spot cargoes. Now we are exploring term deals for US crude,” said AK Sharma, director (finance) at IOC, India’s largest refiner.
Term deals are usually annual contracts for purchase of a predetermined quantity at a price that varies with international rates during the period of contract.
IOC and other state-owned refiners source about 70% of their crude oil via term deals with multiple suppliers across producing regions. The balance 30% is procured from the spot market. Term deals ensure certainty in supply for refiners, and such firm supplies from the far-off US to India could bring traditional suppliers from West Asia under pressure and could help keep prices in check.
“The US has multiple suppliers and a variety of crude. We will have to select a basket of crude that suits us,” Sharma said, adding that term deals with US producers could add up to about one million tonnes of crude oil a year.