Spurred by the prospect of an end to western sanctions, Iran has agreed to consider Indian demands for oil price discounts and other buying incentives, sources said, as it works to rebuild market share in a world awash with crude.
Tehran's return to the market will deepen a global supply glut that has cut benchmark Brent crude prices by two-thirds since 2014, below the lows hit during the 2008 financial crisis and to levels last seen in 2004, leaving producers to battle for market share, Economic Times reported.
The National Iranian Oil Company's international affairs director, Seyyed Mohsen Qamsari, met Indian refiners last week, the sources told Reuters, including firms that halted imports from Tehran because of the sanctions.
Rather than quoting its own terms and prices, people involved in the negotiations said the Iranian delegation tried to persuade the refiners for proposals that would make their supplies more competitive than those of rivals.
Qamsari seemed to be willing to consider better sales terms, apart from offering new grades of crude to boost market share, said four Indian refinery sources with direct knowledge of the talks.
"Naturally, we will see if Iranian oil fits into our model. If it is economical, only then we will go for it," said a source at an Indian refinery that does not buy Iranian oil.
Currently, Iran offers 90-day credit, free shipping and some discounts on crude prices to buyers in India.
India is Iran's second-biggest customer for oil and at around 4 million barrels per day (bpd) is the world's fourth-biggest oil consumer. The country imports some 80% of its needs and demand is set to rise fast as the economy grows at over 7% a year.
"The Saudis and Iraqis are already in the market. If Iran wants to corner their share, it has to offer better terms in the form of discounts and payment conditions," said Ehsan Ul-Haq, senior analyst at London-based consultancy KBC Energy Economics.
"It will be a cut-throat fight for market share among Persian Gulf producers," Haq said.
