Nigeria’s crude oil biggest buyer, India has turned to the United States for the product, with Reuters reporting that India has started “test” purchases of U.S. grades to diversify their imports.
Indian Oil Corporation (IOC) is reported to have issued a tender for one Suezmax or VLCC cargo of US crude loading in December, along with one Suezmax or VLCC of West African crude.
This followed news earlier in the week that the state-run company expected a second US crude cargo containing around 2.2 million barrels to arrive on the west coast by the end of October.
U.S. exports recently set a weekly record with nearly 2 million barrels of crude a day sent overseas. But shipments to India have been rare, with just a few deliveries since the U.S. lifted its ban on crude exports in late 2015.
Indian refineries are starting to increase purchases as the country seeks to secure more supply from outside the Middle East. Refiners are testing both U.S. sweet and sour crudes in their facilities, a common practice when importing crude from new sources.
“A lot of these (Indian refiners) want to see what it’s like if they run it,” said one Houston-based oil broker. “They want to get a taste of U.S. crude.”
Those refiners are taking advantage of a wide spread between U.S. oil and other global benchmarks, which has created an attractive discount on American crude grades.
In June, Indian Prime Minister Narendra Modi and U.S. President Donald Trump met and discussed energy exports to India. Since then the Modi administration has been encouraging more crude imports by waiving some shipping requirements.
Indian refiners Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corporation Limited were given a special permission by the shipping ministry to import oil from the United States until March.
“They’ve been stepping up to be a sizeable importer; they’re looking to diversify away from the Middle East,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.
The executive of India’s state-owned Hindustan Petroleum Corp Ltd said in August the company was assessing whether U.S. crude could replace Nigerian barrels; it made its first buy of U.S. oil in September.