Bloomberg – OPEC’s biggest oil producers are in talks to supply extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with knowledge of the matter said.
Indian refiners, which are waiting for an order from the oil ministry on whether to stop buying Iranian cargoes, are discussing annual term contracts with Saudi Arabia, Iraq and Kuwait for the year starting April 1, the people said this week, asking not to be identified because the information is confidential. While the volume hasn’t been set, the Indian companies have been told there is enough supply to cover the loss of Iranian crude, the people said. The assurances reduce the risk of disruptions to oil supplies for Asia’s third-largest economy as it seeks to cut fuel subsidies and narrow its budget deficit. They are also evidence of how global penalties against Iran because of its nuclear program are squeezing the nation’s revenues. At current prices, Iran stands to lose about $11.5 billion in sales annually if India stops buying its oil.
“This shows how pressure on Iran is increasing, and why Iran’s tone is much more conciliatory in recent times,” said Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England. “Iran might be willing to accept a few more conditions now because otherwise it will find it difficult to meet its budget obligations.”