India’s imports of spot crude cargoes from producers such as the United States and Venezuela are being driven primarily by prevailing cargo and oil prices, the top executive of India’s state-owned Oil and Natural Gas Corporation (ONGC) said.

“Imports are decided by the price, except for term crudes. Now term crudes are gradually going down. Spot crudes are mostly decided cargo-to-cargo based on price,” ONGC chairman and CEO Arun Kumar Singh told Indian media after the company’s annual general meeting.

“So, how much will be imported, we don’t know. But it looks like at least 60 per cent plus of India’s oil imports is a function of the price in that particular month or M+2,” Singh added.

Singh said supply is not the main issue for India, even amid geopolitical upheaval that has complicated Indian term supply in the Persian Gulf.

“It is some geopolitical issue which is causing trouble, and ultimately economics prevail. Geopolitical disturbances could be for some months or years, but ultimately world economy prevails,” he said.

Despite a decline in dependence on primary energy imports, India remains highly dependent on crude oil imports for consumption, at about 90%. India, the world’s third-largest crude oil importer, has seen its dependence on imported crude rise steadily in recent years amid stronger demand and lower domestic production.

That makes pricing especially important for refiners, because a large share of India’s crude buying is negotiated in the spot market or on short-term terms rather than locked in far ahead. The balance between term and spot supply also helps explain why refiners have broadened the list of suppliers they can tap when traditional flows are disrupted.

The Middle East crisis pushed Indian refiners to look for alternatives and prompted the government to consider expanding strategic storage sites to hold more reserves and cushion the next supply shock.

After the Iran war and the disruption of crude flows through the Strait of Hormuz, India sought replacement barrels for lost Middle Eastern supply. Record crude oil imports from Russia helped offset part of the disruption, but India also turned to West Africa, Venezuela, Brazil, and the United States for spot supply to make up for cargoes that are no longer coming from the Persian Gulf.

By Tsvetana Paraskova for Oilprice.com