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India is expected to ramp up its purchase of crude oil from the United Arab Emirates (UAE) in the coming months following discussions between the two countries on the sidelines of the ongoing COP28 summit in Dubai, multiple sources in the know said.
The UAE has historically been India's third-largest source of crude.
It has suffered the largest drop in shipments since Indian refiners began to binge on Russian crude in 2022.
In the first six months of the current financial year (FY24), India has imported $3.2 billion worth of crude from the UAE, down from $9.35 billion in the same period of the preceding year, commerce department data showed.
The resultant 65 per cent fall is the highest for India's top 10 sources of crude oil.
Both countries have signed a free trade agreement, which went into effect in May 2022 and aims to raise non-oil trade to $100 billion by 2030.
Trade in hydrocarbons, however, will remain a major component given it makes up nearly 50 per cent of bilateral shipments, officials said.
“We expect more crude from UAE to arrive in the next few months. Discussions are currently underway at Dubai,” an official at a major refinery said.
He pointed out that the UAE is also set to ramp up exports of its flagship Murban grade of crude from as early as January 2024.
In August this year, the Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL) executed their first crude oil transaction using the Local Currency Settlement (LCS) mechanism.
This is expected to reduce transaction costs, cut down delays in settlements, and improve predictability in trade, officials said.
Discussions in Dubai
The annual meeting of the United Nations Conference of the Parties of the United Nations Framework Convention on Climate Change, more commonly referred to as COP, is set to end on October 12.
The meeting is taking place at a time when nations are increasingly divided over how to achieve a substantial decline in global demand for oil and gas to limit global warming to 1.5 degrees Celsius by 2050.
After more than a year of securing major shipments of Russian crude, India is increasingly looking to re-establish supplies from its traditional partners in West Asia.
Top officials from state-owned oil marketing companies have travelled to the summit and meetings have taken place with other major global oil companies, multiple people in the know have confirmed.
In October, the share of Russian crude in India's imports slipped to 33 per cent, down from September's 35 per cent, and much lower than its historic high of 42 per cent, Reuters reported.
This has happened even as the share of Saudi Arabia and Iraq has crept up in recent months.
Estimates made by London-based commodity data analytics provider Vortexa, which tracks ship movements to estimate imports, showed imports from Saudi Arabia rose to 924,000 barrels per day (bpd) in October, up from 523,000 bpd the previous month.
Meanwhile, Russian shipments to India slipped 8 per cent to 1.55 million barrels per day (bpd) in October, down from 1.62 million bpd in September.
Since April, the majority of Russian oil sold to India has been on the Dubai benchmark, with an average discount level of $8-10 per barrel.
