NEW DELHI - India's oil imports from Iran in 2018-19 could be higher than the previous year despite the imposition of U.S. sanctions, a Reuters analysis of industry data shows, forcing the government to rein in purchases in coming months.
India's oil imports from Iran jumped by about 34 percent in April-October from a year earlier, totalling 603,000 bpd or 17.7 million tonnes, tanker arrival data showed.
The sharp increase was due to front-loading of purchases by Indian refiners ahead of renewed U.S. sanctions on Tehran, which came into effect on Monday.
By choking Iran’s oil and shipping industries, Washington aims to try to force Tehran to quash its nuclear ambitions and ballistic missile programme as well as its support for militant proxies in the Middle East.
The United States granted exemptions to India, China and six other countries, allowing them to temporarily continue buying Iranian oil, but those waiver carry conditions.
For India, Iran's No. 2 oil customer, the 180-day waiver allows refiners to buy only up to 1.25 million tonnes a month, or about 300,000 bpd. That means India will have to slash its monthly purchases from Iran by about half to comply with the waiver.
Analysts still expect that India's purchases of Iranian crude in the full fiscal year ending in March 2019 will exceed the 452,000 bpd, or 22.6 million tonnes, that it imported in the previous year, according to government data.
But there have been some signs of a drop-off in demand. In October, India imported about 466,000 bpd of Iranian oil, according to preliminary tanker arrival data obtained from sources, a decline of 11.6 percent from September and marginally down from October last year.
Most India refiners boosted purchases from Iran ahead of the U.S. sanctions as Iran was offering almost free shipping and extended credit periods, according to oil analysts.
Refiners also wanted to offset the impact of rising global oil prices and a weak Indian rupee.
"Indian refiners imported a lot from Iran in the first half of the fiscal year mainly due to the discount offered by Iran," said Sri Paravaikkarasu, head of East of Suez Oil for consultants FGE in Singapore.
She said New Delhi could even ask refiners to cut imports below the waiver level to curry favour with Washington.
Last year India's imports fell as refiners had curtailed Iranian oil purchases due to a dispute with Tehran over development rights to a giant gas field.
State-run Indian refiners that control about 60 percent of the country's capacity had contracted to buy 396,000 bpd of Iranian oil in the current fiscal year. But with new U.S. sanctions in place, they will now have to tell Iran that they cannot fulfil those agreements.