India has started purchasing crude oil for its strategic petroleum reserve (SPR), taking advantage of lower prices.
Reuters, citing trade sources, reported that state refiner Indian Oil Corp bought a two million barrel cargo of Iraqi crude from Chinese trader Unipec. The cargo will be loaded in May for shipping to India's first underground SPR in Andhra Pradesh, which has a capacity of 9.75 million barrels (1.33 million FT).
The cargo Basrah IOC bought from Unipec, the trading arm of China's state-backed oil producer Sinopec, was purchased at a premium to the official selling price of the Iraqi grade, according to the sources.
State-refiners IOC and Hindustan Petroleum will buy another three Very Large Crude Carriers between them for the site in Andhra Pradesh.
India, the world's fourth biggest oil consumer, has been planning to stockpile crude oil to meet emergencies, and almost completed the first phase of building SPRs.
The country built its first underground SPR in Andhra Pradesh in February, and construction of two others in the first phase is nearing completion.
India is planning to build five more crude reserves that can hold 12 million metric tons (FT) of oil, ensuring more than one month of supply to the nation in case of disruptions. The country is also seeking foreign investment for the initiative.
India's move comes amid declining oil prices and fears that reduced US dependence on West African oil would make oil installations in the region more vulnerable to attacks.
The shale boom in the US has dramatically cut down the economic superpower's dependence on Gulf nations.
India consumes approximately 3,500,000 barrels of oil each day, and depends on imported oil for 80% of its needs.