Indian refiners seek term contracts reducing reliance on spot purchases
OIL & GAS

Indian refiners seek term contracts reducing reliance on spot purchases

According to sources familiar with the matter, India's public sector refiners, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), are actively seeking crude oil term contracts with favourable terms. This move is aimed at reducing the reliance on spot cargoes for their oil imports and diversifying their crude supply basket due to the unpredictable and volatile nature of the international oil market.

India, being the world's third-largest consumer of crude oil, depends on imports to fulfil more than 85 per cent of its requirements. Currently, approximately 70 per cent of the public sector refiners' oil imports are through term deals, while the remaining portion is obtained through spot purchases. Spot contracts involve immediate purchases from suppliers or traders with short delivery cycles, whereas term contracts are long-term agreements with fixed volumes and pricing mechanisms.

In April, the largest refiner in India, IOC, signed a significant term contract with Russian oil major Rosneft. The supply volume was not disclosed. BPCL is reportedly in discussions with Rosneft to finalise a term deal for approximately six million tonnes of Russian crude annually. Additionally, efforts are underway at the government-to-government level between India and Guyana to secure oil supplies from the Caribbean nation, and negotiations are ongoing with Iraq for improved payment terms, as Iraq is already a major crude supplier to India. Last year, IOC also entered into term contracts with Brazil's Petrobras and Colombia's Ecopetrol.

In recent years, Indian refiners had increased their reliance on spot purchases to take advantage of low spot prices when global supplies were abundant. However, prior to 2015, spot purchases accounted for less than 20 per cent of the public sector refiners' oil procurement. Spot purchases are typically beneficial for refiners when supplies are plentiful and prices are declining. However, in times of high price and availability volatility, term contracts provide a more secure supply and an agreed-upon pricing mechanism.

Since Russia's invasion of Ukraine in February 2022, the global oil market has experienced significant volatility. While the volatility has subsided to some extent, concerns have arisen due to recent production cuts by major oil producers in an effort to stabilise crude oil prices. This has led to expectations of a tighter market and higher spot prices in the future.

It is worth noting that India's increased imports of Russian oil over the past 15 months, making Moscow the largest supplier of crude to New Delhi, have primarily been through spot contracts. Russia has offered lucrative discounts to attract buyers, especially after many Western buyers began avoiding its oil. However, Indian refiners' interest in term contracts for Russian crude has grown significantly as the market tightens and competition for discounted Russian barrels, particularly from China, intensifies.

An official from one of the public sector refiners emphasised the importance of supply assurance in a scenario with high oil prices and a scramble for cargoes in the spot market. They stated, "When there is an abundance of oil available at low prices, spot contracts are advantageous. However, in an environment of high prices and fierce competition in the spot market, supply assurance becomes paramount."

According to sources familiar with the matter, India's public sector refiners, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), are actively seeking crude oil term contracts with favourable terms. This move is aimed at reducing the reliance on spot cargoes for their oil imports and diversifying their crude supply basket due to the unpredictable and volatile nature of the international oil market. India, being the world's third-largest consumer of crude oil, depends on imports to fulfil more than 85 per cent of its requirements. Currently, approximately 70 per cent of the public sector refiners' oil imports are through term deals, while the remaining portion is obtained through spot purchases. Spot contracts involve immediate purchases from suppliers or traders with short delivery cycles, whereas term contracts are long-term agreements with fixed volumes and pricing mechanisms. In April, the largest refiner in India, IOC, signed a significant term contract with Russian oil major Rosneft. The supply volume was not disclosed. BPCL is reportedly in discussions with Rosneft to finalise a term deal for approximately six million tonnes of Russian crude annually. Additionally, efforts are underway at the government-to-government level between India and Guyana to secure oil supplies from the Caribbean nation, and negotiations are ongoing with Iraq for improved payment terms, as Iraq is already a major crude supplier to India. Last year, IOC also entered into term contracts with Brazil's Petrobras and Colombia's Ecopetrol. In recent years, Indian refiners had increased their reliance on spot purchases to take advantage of low spot prices when global supplies were abundant. However, prior to 2015, spot purchases accounted for less than 20 per cent of the public sector refiners' oil procurement. Spot purchases are typically beneficial for refiners when supplies are plentiful and prices are declining. However, in times of high price and availability volatility, term contracts provide a more secure supply and an agreed-upon pricing mechanism. Since Russia's invasion of Ukraine in February 2022, the global oil market has experienced significant volatility. While the volatility has subsided to some extent, concerns have arisen due to recent production cuts by major oil producers in an effort to stabilise crude oil prices. This has led to expectations of a tighter market and higher spot prices in the future. It is worth noting that India's increased imports of Russian oil over the past 15 months, making Moscow the largest supplier of crude to New Delhi, have primarily been through spot contracts. Russia has offered lucrative discounts to attract buyers, especially after many Western buyers began avoiding its oil. However, Indian refiners' interest in term contracts for Russian crude has grown significantly as the market tightens and competition for discounted Russian barrels, particularly from China, intensifies. An official from one of the public sector refiners emphasised the importance of supply assurance in a scenario with high oil prices and a scramble for cargoes in the spot market. They stated, When there is an abundance of oil available at low prices, spot contracts are advantageous. However, in an environment of high prices and fierce competition in the spot market, supply assurance becomes paramount.  

Next Story
Infrastructure Urban

TBO Tek Q2 Profit Climbs 12%, Revenue Surges 26% YoY

TBO Tek Limited one of the world’s largest travel distribution platforms, reported a solid performance for Q2 FY26 with a 26 per cent year-on-year increase in revenue to Rs 5.68 billion, reflecting broad-based growth and improving profitability.The company recorded a Gross Transaction Value (GTV) of Rs 8,901 crore, up 12 per cent YoY, driven by strong performance across Europe, MEA, and APAC regions. Adjusted EBITDA before acquisition-related costs stood at Rs 1.04 billion, up 16 per cent YoY, translating into an 18.32 per cent margin compared to 16.56 per cent in Q1 FY26. Profit after tax r..

Next Story
Infrastructure Energy

Northern Graphite, Rain Carbon Secure R&D Grant for Greener Battery Materials

Northern Graphite Corporation and Rain Carbon Canada Inc, a subsidiary of Rain Carbon Inc, have jointly received up to C$860,000 (€530,000) in funding under the Canada–Germany Collaborative Industrial Research and Development Programme to develop sustainable battery anode materials.The two-year, C$2.2 million project aims to transform natural graphite processing by-products into high-performance, battery-grade anode material (BAM). Supported by the National Research Council of Canada Industrial Research Assistance Programme (NRC IRAP) and Germany’s Federal Ministry for Economic Affairs a..

Next Story
Infrastructure Urban

Antony Waste Q2 Revenue Jumps 16%; Subsidiary Wins Rs 3,200 Cr WtE Projects

Antony Waste Handling Cell Limited (AWHCL), a leading player in India’s municipal solid waste management sector, announced a 16 per cent year-on-year increase in total operating revenue to Rs 2.33 billion for Q2 FY26. The growth was driven by higher waste volumes, escalated contracts, and strong operational execution.EBITDA rose 18 per cent to Rs 570 million, with margins steady at 21.6 per cent, while profit after tax stood at Rs 173 million, up 13 per cent YoY. Revenue from Municipal Solid Waste Collection and Transportation (MSW C&T) reached Rs 1.605 billion, and MSW Processing re..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement