Indian Oil Corporation (IOC) Issues First Sour Crude Tender After US Sanctions on Russia

Indian Oil Corporation (IOC) has issued its first tender for sour crude imports since March 2022. This comes in light of fresh US sanctions on Russian oil producers and tankers, prompting refiners to explore alternative supply options. Alongside its sour crude tender, IOC has floated a separate tender for sweet crude oil, seeking supplies for loading between February 16 and March 15, 2024. 

Indian Oil Corporation (IOC) Ltd stock was at ₹130.39 today, on January 20, at 3:24 PM, up 1.81% for the day but down 22.47% over 6 months and 6.16% over the past year.

Impact of US Sanctions

The new sanctions, targeting Russian producers Gazprom Neft and Surgutneftegaz and 180 tankers, are expected to impact the flow of Russian oil to India. These measures, effective from March 12, 2024, after a wind-down period, could end discounts on Russian oil. 

The sanctions also pose challenges for Indian refiners, as transactions involving sanctioned tankers may attract secondary sanctions, complicating dollar payments and dealings with US entities.

Indian Oil Corporation’s (IOC) Purchases

IOC has procured 7 million barrels of crude oil from the spot market, including supplies from the Middle East and Africa. This includes a purchase of Abu Dhabi’s Murban crude, acquired at a premium of approximately $5 per barrel above Dubai quotes. Other purchases include 1 million barrels each of Nigeria’s Agbami and Akpo crude, Gabon’s Rabi Light, and Angola’s Nemba crude.

Rising Crude Premiums and Tanker Rates

Spot premiums for Middle Eastern crude reached their highest levels in over 2 years, driven by demand from China and India. Meanwhile, tanker rates have surged, further increasing procurement costs. Indian refiners, heavily reliant on Russian oil, now face challenges in sourcing affordable alternatives amid rising costs.

Market Adjustments by Indian Refiners

With reduced Russian oil supplies, IOC and other Indian refiners are increasingly turning to the Middle Eastern spot market. This shift shows the broader impact of geopolitical developments on global energy markets.

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