First American Crude Oil Shipped to India

The first shipment of two million barrels of American crude oil costing $100 million will reach India in the last week of September, opening a new chapter in trade between India and the U.S. This consignment is a fraction of India’s $70 billion oil import bill for 2016-17. Given the volume being contemplated by Indian companies, this new development is currently expected to boost the bilateral oil trade to $2 billion annually.

The Hindustan Times reports that while the 40-year-old ban on export of American oil was lifted by the then U.S. President Barack Obama in December 2015, the real move started during the maiden meeting between Prime Minister Narendra Modi and U.S. President Donald Trump on June 26 when the two leaders agreed to deepen the engagement in the energy sector.

President Trump and PM Modi

Saudi Aramco‘s decision to raise Arab Light crude price by 60 cents per barrel for Asian buyers narrowed the differential between West Asian crude oil and North Sea Brent, the benchmark for most of global oil trade. The narrowed differential turned U.S. oil attractive for India even after factoring the distance between the two countries.

India’s largest state-run refiner-marketer Indian Oil Corporation Limited (IOC) and state-owned companies Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have all opted for American crude oil.

BPCL bought a cargo containing 500,000 barrels each of Mars and Poseidon, and 1 million barrels of U.S. WTI Midland sweet crude; IOC sealed a deal to purchase 1.6 million barrels of crude oil from the U.S. in July, and this month it placed an additional order of 2 million barrels. HPCL plans to buy low-sulfur oil from the United States in the next few months for its 166,000 barrel per day refinery in southern India.

Senator Ted Cruz said Texas will provide crucial oil exports to India and serve as a reliable long-term supplier of energy.

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Posted on by Gunjan Bagla
Gunjan Bagla
California-based management consultant Gunjan Bagla runs Amritt, a consulting firm helping American companies to succeed in India. Amritt is the trusted advisor for India market research, India business development, India market entry, Global Engineering, Global Technology Scouting, India R&D and Open Innovation. Gunjan is author of "Business in 21st Century India: How to Profit Today from Tomorrow’s Most Exciting Market" (Hachette Book Group, 2008), Amazon's top rated title on the subject. He has appeared as the India Expert on BBC Television, Bloomberg TV, Fox Cable Business and has been quoted in the New York Times, the Los Angeles Times, the Hollywood Reporter and Business Week for his expertise on India.

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