Indian Oil Treads New Waters—US Out, Nigeria & UAE In

Setting the Scene

On September 5, 2025, Indian Oil Corporation (IOC), the nation’s top state refiner, discontinued its purchase of U.S. crude oil in its latest tender. Instead, it secured 2 million barrels of Nigerian crude (Agbami and Usan grades) and 1 million barrels of Das crude from Abu Dhabi. These oils are set to arrive at Indian ports between late October and early November.

Why the Change of Course?

Although favorable arbitrage previously made U.S. West Texas Intermediate (WTI) oil appealing, the landed cost has surged, making Nigerian and Middle Eastern alternatives more cost-effective. Additionally, a 50% U.S. tariff on Indian goods—imposed as retaliation for India's continued imports of Russian oil—has escalated geopolitical and trade friction.

Market Flashpoints & Strategic Stakes

Geopolitical friction with the U.S. continues to deepen, as India's energy imports from Russia remain a point of contention.

IOC’s pivot to African and Middle Eastern crude signals a diversification strategy to mitigate both cost pressures and reliance on any single supplier.

How This Impacts the Indian Market

Sector   Impact Highlights
Refining Margins   Diversified supply can improve margins if landed costs remain lower compared to U.S. crude.
Trade Deficit   Reduction in U.S. oil purchases may widen trade imbalance, but cheaper alternatives can offset costs.
Diplomacy & Trade   This move reflects India’s balancing act—nurturing strategic autonomy while navigating U.S. trade tensions.
Fuel Prices   Cheaper crude sources can stabilize domestic fuel prices, though volatility remains amid geopolitical uncertainty.
Investor Sentiment   Energy sector may attract attention for operational adaptability, but geopolitical risk could temper enthusiasm.
Domestic Policy   Highlights urgency for investment in refining capacity, alternate supply channels, and possibly greater supply diversification.

Final Thoughts

IOC’s decision to sidestep U.S. crude in favor of Nigerian and UAE alternatives reflects a delicate balance between economic pragmatism and geopolitical strategy. As India continues to guard its energy interests, market watchers will closely monitor whether these procurement shifts become a temporary tactic or part of a longer-term sourcing strategy.

By Nehal Taparia

This content is for educational and knowledge purposes only and should not be considered as investment or Trading advice. Please consult a certified financial advisor before making any investment or Trading decisions.

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Our Recent FAQS

Frequently Asked Question &
Answers Here

1. Why did Indian Oil reject U.S. crude this time?

IOC found U.S. WTI oil economically unattractive due to high landed costs compared to Nigerian and Abu Dhabi grades—even though arbitrage previously favored U.S. imports.

2. What’s behind the 50% U.S. tariff on Indian goods?

The U.S. doubled tariffs to 50% in response to India's ongoing import of Russian oil—seeing it as support for Moscow amid the Ukraine conflict.

3. Is India reducing Russian oil imports due to U.S. pressure?

No. Despite U.S. pressure, India remains committed to Russian oil due to its cost advantage and energy security considerations—and analysts suggest imports may even rise.

4. How might this affect Indian energy security?

Diversifying toward Nigerian and Middle Eastern crude may enhance supply resilience. However, continuing reliance on Russian oil keeps India susceptible to geopolitical shifts.

5. Could IOC return to purchasing U.S. crude later?

Possibly—if price dynamics shift or if geopolitical tensions ease. IOC had earlier procured 5 million barrels of U.S. WTI in late August when arbitrage favored it.