Indian Oil Turns to Middle East, Africa as U.S. Crude Loses Lure

India’s largest refiner, Indian Oil Corporation Ltd (IndianOil), has opted to forgo U.S. crude in its latest procurement tender, favoring supplies from the Middle East and West Africa instead. The decision reflects shifting economic dynamics in the global oil market and follows IndianOil’s purchase of 5 million barrels of U.S. West Texas Intermediate (WTI) crude in a previous tender. This time, the company secured 2 million barrels of West African crude, including Nigeria’s Agbami and Usan grades, alongside 2 million barrels of Middle Eastern crude, such as one million barrels of Abu Dhabi’s Das crude from Shell, according to trade sources [1]. The move comes as Indian refiners adjust to volatile pricing patterns and arbitrage opportunities in the crude oil space.

Recent weeks have seen U.S. crude become an attractive option for Asian refiners due to competitive pricing and an open arbitrage window. This has led to an increase in U.S. oil imports by both state and private refiners in India, particularly in August when freight costs were lower. However, as prices for Middle Eastern crude grades like Dubai and Murban have risen—driven by strong demand for high-sulfur crude and reduced Murban shipments—U.S. crude’s appeal has waned for some buyers [1]. Indian refiners, prioritizing cost efficiency, had previously capitalized on these favorable conditions to boost U.S. crude procurement.

India’s trade relationship with the U.S. has been complicated by ongoing tensions, particularly regarding the purchase of Russian crude. The Trump administration has criticized India for importing discounted Russian oil, with threats of tariff action in response. However, Indian refiners continue to seek bargains, and the deepening discounts on Russian crude—fueled by constrained refining capacity due to Ukrainian drone strikes—suggest further imports in September could outpace August levels [1]. This trend highlights how market economics often take precedence over political considerations in India’s energy procurement strategies.

The shift away from U.S. crude could also impact the U.S.-India trade balance. Increased purchases of American oil had the potential to narrow the U.S. trade deficit with India, which has been a point of contention during trade negotiations. While U.S. crude remains a viable option for Indian refiners, fluctuating prices and regional supply dynamics appear to be steering procurement decisions away from the Americas [1]. Analysts suggest that as long as Middle Eastern and Russian crude continue to offer competitive pricing, the U.S. will struggle to regain ground in the Indian market.

India’s strategic energy sourcing choices are also influenced by broader geopolitical currents. As part of the BRICS group, India has increasingly aligned itself with alternative economic structures, including the use of non-dollar currencies for trade settlements. This context, combined with its pursuit of Russian and African crude, underscores a broader trend of diversification in its energy supply chain. While U.S. crude remains on the radar, the current procurement landscape reflects a more pragmatic approach driven by immediate economic returns rather than geopolitical alignment [1].

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[1] Top Indian Refiner Snubs US Oil in Latest Tender (https://oilprice.com/Latest-Energy-News/World-News/Top-Indian-Refiner-Snubs-US-Oil-in-Latest-Tender.html)