OPEC’s share of India’s oil imports dropped to the lowest, in at least two decades in the year to the end of March, as overall purchases by Asia’s third-largest economy fell to a six-year low. Total crude imports by the world’s third-largest oil importer dropped by 11.8 percent to 3.97 million barrels per day (bpd) in the fiscal year ending March. India purchased more oil from the United States and Canada at the expense of oil from Africa and the Middle East, reducing purchases from OPEC members to about 2.86 million barrels per day, and reducing the group’s share of imports to 72 percent from about 80 percent previously.
India’s refiners are diversifying their purchases to increase margins, and have upgraded plants to process cheaper tougher crude grades, but refinery runs have been hampered by the pandemic, which has reduced fuel consumption. The country’s annual fuel demand in 2020/21 dropped for the first time in at least 23 years, reaching its lowest level since 2016/2017, the share of Middle Eastern producers increased to around 62 percent in 2020/21 from 60 percent the previous year, as refiners took committed volumes under annual oil contracts.
The United States is now India’s fifth-largest supplier, up to two positions from the previous year. Iraq, Saudi Arabia, and the United Arab Emirates continue to be India’s top oil suppliers. Nigeria has overtaken Venezuela as the world’s fourth-largest supplier. India imported 4.39 million bpd in March, up 12% from February, as refineries increased output. However, this was still a 0.5 percent decrease from March 2020, Iraq was the top supplier, led by Saudi Arabia, pushing the United States into the fourth position behind the United Arab Emirates.
“According to a plan decided upon before the coronavirus outbreak in India, the producer group known as OPEC+ would slightly ease oil production cuts starting. Form many days, India, the world’s third-largest crude importer, has seen a daily increase of more than 300,000 cases. It also claims to have killed almost 200,000 people. The likelihood that rising OPEC+ output will collide with weakening Asian oil demand indicates that the global oil supply surplus that has been supporting the complex for the past year could be coming to an end”, said Jim Ritterbusch, president of Ritterbusch and Associates.
OPEC sources will stick to existing plans to increase oil production marginally with the producer group, implying that they do not expect the coronavirus crisis in India to have a long-term effect on demand. The group has also scrapped plans for a full ministerial conference, despite a technical meeting expressing concern about rising COVID-19 cases while maintaining its oil demand.
Last year’s record OPEC+ supply cuts helped drive in the price recovery from historic lows. Even after the proposal to increase production marginally from May, most of the restraints remain in place. They expect the oil market to be undersupplied by 1.5 million barrels per day this year, with only a marginal rise outside of OPEC taking a conservative approach.
