US becomes second biggest oil supplier of India

The United States has overtaken Saudi Arabia as the second-biggest oil supplier of India in February 2021, as the refiners boosted the cheap U.S. crude purchases to record levels to offset supply cuts by OPEC- Organisation of the Petroleum Exporting Countries.

The switch in supplies, triggered by the lower demand for U.S. crude, coincided with Saudi’s voluntary extra 1 million bpd output cut on top of an agreement by OPEC+ and its allies in order to maintain lower production.

India as the third-biggest oil importer and consumer of the world had repeatedly called on major oil producers to ease the supply curbs in order to aid global economic recovery. The country had also pointed to Saudi’s voluntary cuts for contributing to a spike in the oil prices globally.

Oil supply from US increases:

The oil imports by India from the US- the global top producer- rose to 48% to a record 5,45,300 barrels per day (bpd) in February 2021 from the prior month. It accounted for 14% of India’s overall imports last month.

In contrast, the imports in February from Saudi fell by 42% from the previous month to a decade-low of 4,45,200 bpd. Saudi Arabi, which consistently has been one of India’s top two suppliers has slipped to 4^th position for the first time since January 2006.

Why the increase in supply from the US took place?

As the demand in the US was weak and refineries were running at low rates, the US crude oil had to go somewhere and Asia was identified as the only region which saw the rapid demand recovery.

Due to diplomatic conflicts and trade problems, China was out of the question to not take US oil so India was the obvious choice in the Asian region.

Iraq continues to be the top oil seller to India:

Iraq has continued to be the top seller of oil to India. The country has maintained its position despite a 23% decline in oil purchases to a five-month low of 8,67,500 bpd.

As the second-largest producer of OPEC, Iraq reduced the annual supplies of oil to several Indian refiners. The step was taken to meet its obligations under the group’s production deal.