Traders are beginning to work with countries outside of Europe and the United States for Iranian crude oil. They are offering it to Indian refiners at a premium to ICE Brent, since Washington has temporarily allowed some activity due to the ongoing energy crisis caused by the Israel-US conflict with Iran.
In response to the lack of energy supply through the Strait of Hormuz, which has now been going on for four weeks, traders and exporters have created opportunities for Indian refiners to bring in Iranian crude oil and LPG (liquefied petroleum gas) over the next month, News Agency Reuters reported.
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India, the world’s third-largest oil importer, has not purchased oil from Iran since May 2019 due to US pressure. However, the current disruption in energy supplies through the Strait of Hormuz, now in its fourth week, has significantly impacted the country’s fuel availability.
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With the proximity of India to Iran, Indian refiners may be taking advantage of this window of opportunity. As a result, Indian refiners have increased their purchases of Russian crude oil since the United States has recently lifted sanctions to stabilise global oil prices.
According to Reuters sources, both Iranian traders and the National Iranian Oil Company (NIOC) would prefer payment in US dollars for crude oil (Iran remains under UN sanctions), but some may accept Indian rupees as well.
The Trump administration on Friday issued a 30-day sanctions waiver for the purchase of Iranian oil already at sea, US Treasury Secretary Scott Bessent said.
The waiver applies to oil loaded on any vessel, including tankers under sanctions, on or before March 20 and discharged by April 19, according to the Office of Foreign Assets Control.
Traders and the National Iranian Oil Company are seeking payments primarily in US dollars, though some are open to transactions in Indian rupees. As per the sources, traders are offering Iranian crude oil at prices ranging from USD 6 to USD 8 per barrel above ICE Brent, and payment for the crude oil is to be received within seven days of delivery.
Indian refineries are cautious despite having access to fuel from Iran because they want to understand how to pay for the fuel, since Iran has not had access to the SWIFT banking system that most international financial transactions use.
The IEA has also suggested that the energy crisis could be worse than the impact of the oil shocks in the 1970's.
Sujata Sharma, joint secretary in the federal oil ministry, while talking to the reporters at an energy conference, stated that any decision to buy Iranian fuel would be "a techno-commercial decision" on the part of the oil companies.