A Joe Biden presidency could lead to resumption of Iranian oil supply to India, which would reduce prices, but any such move would take time and the US shale industry is likely to oppose steps that make oil cheaper, industry experts said.
The US administration would continue to value India as a major energy market that lures oil and gas producers in the country, while Indian refiners are happy to reduce their dependence on oil from the Middle East.
Low oil prices are crucial for India that imported $100 billion worth of crude oil last fiscal year. Lower prices helped the government raise resources by increasing fuel taxes in a year the pandemic hit public finance.
“Prices will remain benign in general,” Hindustan Petroleum chairman MK Surana said. “Producing countries are already producing less than capacity. Supply from Libya is increasing. If Biden is soft on Iran, it will bring more supplies to the market.”
Crude oil is currently trading around $40 a barrel, with prices varying barely a few dollars per barrel since June as producers have adjusted supplies while demand has returned in many economies. The shock of the pandemic, which forced lockdowns across several countries for months, had sent prices below $20 a barrel in late April from nearly $70 at the beginning of the year.
“When prices were high, a Trump tweet would make some difference as it would put producers under pressure,” said A K Sharma, former finance chief of Indian Oil Corp, the nation’s largest refiner. “But now prices are already so low and global demand shaky that it wouldn’t matter much who the president is.”
India’s purchase of crude oil from the US started during the presidency of Trump, who pushed countries like India and China to bridge trade gaps by importing more energy from America, which had just turned the world’s biggest oil producer and shaken off laws curbing crude export.
“Initially, of course, there was a diplomatic push, but all crude purchase deals were signed because the US crude came at competitive price,” Sharma said. “Indian refiners consciously wanted to reduce dependence on Middle-East producers.”
Sharma had guided the initial deals for purchase of US oil. “Also, US suppliers are private producers, not state-run players and so who’s in the White House matters much less,” he said.
Indian refinery executives and analysts also expect sanctions on Iran to soften during the Biden presidency. “A return of Iranian barrels is more likely under a Biden than a Trump administration,” said Shin Kim, head of oil supply and production analytics at S&P Global Platts. “We do not expect a meaningful return of Iranian oil before 2022 under either Trump or Biden.”
Indian refiners used to source nearly a tenth of their requirement from Iran, but had to totally stop purchase after Trump imposed tough sanctions in the middle of 2019. Some refiners like Rosneft-backed Nayara Energy and state-run MRPL depended far more heavily on Iranian oil than other Indian refiners, and had to look for substitutes from far-away countries.
