India’s imports of oil from the US are likely to increase as the world’s largest crude producer, on the orders of the newly appointed US President Donald Trump, is anticipated to further increase production.
However, this rise in imports would be subject to several factors such as freight costs, type of crude oil available and the discounts offered by producers.
As Trump took charge as the 47th US president on January 20, he declared a “national energy emergency” and promised to cut energy costs for the country by half by drilling for more oil and gas. The US produces 19.4 million barrels of oil per day, accounting for one-fifth of total global production. The country also has the ninth largest oil reserves in the world at 68.8 billion barrels.
“It would take time for companies in the US to increase oil production. The producers would also be cautious in increasing production as it would further result in declining oil prices. Moreover, with respect to India, OPEC+ nations also have high spare capacity,” said Prashant Vasisht, vice president and co-head, corporate ratings, ICRA.
“India will import more oil from the US but (Indian) companies would evaluate options and preferably prioritise Middle East suppliers. The final call would be based on the economics of it including freight charges and discounts provided by the countries,” added Vasisht.
India is a net importer of crude oil with over 85 percent of its domestic demand being met by shipments from countries including Russia, Saudi Arabia, Iraq and the US. Since the war between Russia and Ukraine, India’s reliance on oil imports from Moscow has sharply risen on account of discounted crude from the country.
However, in recent months, Russian discounts have narrowed, shifting India’s focus back to Middle East suppliers—mainly Saudi Arabia and Iraq—and scouting for additional suppliers. With the US planning to bring more oil to the market, the country’s share in India’s total imports is expected to increase.
India’s oil minister Hardeep Singh Puri told reporters on January 21 that India would buy more oil from the US, adding that the country is willing to buy from “whoever can supply”.
“It takes time to ramp up output. I think it would be a big market for India. India would increase imports to a certain quantum but Europe is expected to be the top buyer of the increased supplies from the US,” said Hitesh Jain, lead analyst at Yes Securities.
The US is the fifth largest supplier of crude oil to India with imports gradually rising from that country in recent months. In December, India imported 75,000 barrels of crude oil from the US, showed data from energy cargo tracker Kpler.
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