DNA Money Edit: Importance of Iranian oil for India

The warning by the Paris-based International Energy Agency that oil prices could scale above $80 a barrel is definitely not good news for India. As murmur against rising retail prices of diesel and petrol turns a political cacophony, India may have to keep its crude-sourcing options open.

The double whammy of a significant fall in Iranian crude exports owing to the US strictures and a drastic dip in output in Venezuela due to its economic crisis is leaving international crude prices on a high. The US has stepped up pressure on buyers to halt Iranian energy imports from November. Meanwhile, the Organization of Petroleum Exporting Countries and allies including Russia have pledged to boost their output.

Iranian production is arguably the single most important catalyst for oil prices. In August, India imported about 5.23 lakh bpd of oil from Iran, its traditional market, down 32% over a month earlier. Latest reports suggest that Iran has begun to store oil in its own tankers off its coasts ahead of the US sanctions. Several Iranian crude carriers are sitting fully laden for weeks. China, Iran's top customer in Asia, may not cut off its imports.

India needs to take ahead the recent 2+2 Dialogue with the US and convince them the importance of Iranian crude purchase as the country faces an unavoidable inflation due to high oil retail prices.