Crude oil at biggest discount in over a decade; this is where Indian Oil is still buying oil from

Gulf producers such as Iraq and Saudi Arabia -- which together supplied around 40% of India’s oil imports last year -- have been offering cargoes at very attractive prices recently, Sanjiv Singh, chairman of Indian Oil Corp., said in an interview.

India’s biggest refiner is sticking to Middle Eastern oil as suppliers offer deep discounts, suggesting rival producers may have a harder time making inroads in the world’s third-largest crude importer.

Gulf producers such as Iraq and Saudi Arabia — which together supplied around 40% of India’s oil imports last year — have been offering cargoes at very attractive prices recently, Sanjiv Singh, chairman of Indian Oil Corp., said in an interview. Marketers SOMO and Aramco offered Asian buyers crude at steepest discounts in more than a decade last month at the height of a price war between global producers.

“When you look at the discounts being offered by Middle East countries over and above the market prices, definitely these crudes become more attractive,” Sanjiv Singh, chairman of the state-run processor, said in an interview. “When we are buying any crude, at that particular time whatever is the best offer, we take.”

The aggressive pricing from Middle Eastern suppliers may make it harder for producers such as the U.S., Nigeria, Mexico and Russia to win even more market share in India. All four producers sold more crude to the nation last year than they did in 2018, with American supplies almost doubling, as imports from the Persian Gulf nations fell.

They’ll also be competing for a share of a much smaller pie, with Indian oil demand expected to take until the end of 2020 to get close to a full recovery from the coronavirus.

Gasoline sales are currently running at about half of last year’s average, while diesel is at 60%, according to Singh. At the peak of oil demand destruction in India, consumption of gasoline and diesel fell to 30%-35% of 2019 levels, he added. The IOC chairman said he doesn’t expect overall demand to start picking up until the quarter starting October.