Indian Oil Imports From Iran Surge to Highest Since 2016

India’s oil imports from Iran surged to about 705,000 barrels per day in May, their highest level since October 2016, according to data from shipping and industry sources, despite the threats of fresh US sanctions.

As of June, India’s oil imports from Iran could drop because at least two refiners—accounting for about 35% of Indian refining capacity of around 5 million bpd—are preparing to curb purchases under pressure from the US sanctions, Reuters reported.

On May 8, US President Donald Trump said the United States was pulling out of a 2015 international nuclear deal with Iran and would impose new sanctions seeking to reduce the country’s oil shipments.

India’s oil imports from Iran in May rose by 10.2% from the previous month and were about 45% more than a year ago, the data showed.

Iran’s oil exports hit 2.7 million bpd in May, the news portal of Iran's Oil Ministry, Shana, reported this month, representing a record high since the lifting of international sanctions on Tehran in 2016.

Indian state refiners had cut oil imports from Iran in the 2017-18 financial year because of a dispute over the development rights of a giant gas field.

However, the refiners had drawn plans to raise imports in the current fiscal year from April after Iran agreed to steep shipping discounts.

India, the world’s third-biggest oil importer and consumer, is Iran’s second-biggest customer behind China.

Nayara Energy, formerly known as Essar Oil and in which Russia’s Rosneft holds a majority stake, has started reducing Iranian oil imports from this month, sources said. In May, Nayara was the biggest Indian buyer of Iranian oil, receiving more than 200,000 bpd, the data showed.

Reliance Industries, owner of the world’s biggest refining complex, is preparing to halt the import of Iranian oil from October or November, sources said.

India’s Oil Minister Dharmendra Pradhan last week said the country has adopted a “wait and see” policy pending clarity on the impact of US sanctions.

In the first five months of 2018, India imported 583,500 bpd from Iran, about 6.5% more than a year ago, data from the sources showed. The sources declined to be identified because they are not authorized to speak to the media.

Iran remained the third-biggest oil supplier to India last month behind Iraq and Saudi Arabia, with the UAE having replaced Venezuela as the fourth-biggest supplier.

Overall, India imported 4.34 million bpd in May, about 2.8% higher than a year ago.

The US sanctions on Iran’s petroleum industry will take effect after a 180-day “wind-down period” ending on Nov. 4, but many European refiners and Asian buyers are already winding down Iranian oil purchases.