Gulf won't significantly cut down oil exports to India to satisfy Europe

Gulf oil exporters will most likely not cut crude supplies to India significantly next year in a bid to satisfy growing demand from Europe, executives at Indian state-run refiners told The Economic Times. 

State-run refiners, which are currently preparing to negotiate an annual crude purchase deal, source nearly 60 per cent of their oil requirement through term deals. The annual buy agreement is renewed every year with the Gulf suppliers, mainly with West Asian national oil companies.

Amid Russia’s ongoing war in Ukraine, European nations have pledged to cut down their Rusian oil dependency by December and are seeking to replace Moscow's crude from Gulf countries and other sources. As Europe decreases Russia's oil imports, Russian crude has gained a big share in India's spot purchases. 

For Indian refiners' term deals with Gulf nations that start from next year in January, negotiations will start in September-October. For contracts starting in April, negotiations start during the December-January period. The deals mostly have both ‘firm’ and ‘optional’ volumes, reported ET. 

“Our term deals are unlikely to be hit. Gulf suppliers may not offer optional volume this time,” a state-run refiner's executive told the business daily. 

Another company's executive said, “The Gulf’s production is finite, and some rerouting of supplies must happen to accommodate the new demand,” ET quoted. 

“If producers offer term deals to Europeans, they must offer less to existing customers or in the spot market," the executive added.

A third executive at a refiner told ET that the increased demand from Europe could push up Dubai-Oman, the West Asian price benchmark, and the premium on that for Asian customers.

“But I don’t think they are going to reduce the firm quantity in any significant way. They might want to meet the new European demand but not at the cost of souring a decades-old relationship with India, which is the world’s third-largest consumer and importer of crude,” the executive, who did not want to be named, told the newspaper.