Indian Oil Corporation (IOC), country’s largest refiner has signed its first annual contract to buy oil from United States (US). This makes IOC first domestic company to sign long-term supply contract with US. Till now, Indian refiners were buying US crude oil in spot markets since 2017.
- The annual deal is worth $1.5 billion and will be effective for FY20 starting from April 2019. Under it, IOC will import of up to 3 million tonne of crude oil (60,000 barrels a day) of US origin grades.
- Previously, IOC had purchased US oil from spot markets and had signed mini-term deal in August 2018 to buy 6 million barrels of US oil between November 2018 and January 2019.
Significance of this deal
- It will help India to diversify its crude sources. It will also help boost trade between India and US.
- Currently, IOC buys about 75% of its oil needs through long-term deals, mostly with Organisation of Petroleum Exporting Countries (OPEC).
- The term deal will help cut IOC's dependence on OPEC crude. It will also make US, a guaranteed long-term term supplier, considering rising geopolitical issues especially in Middle east (Iran), Venezuela, West Africa.