LONDON: India has bought the first oil for its strategic petroleum reserve (SPR), trade sources said on Monday, marking the start of a round of purchases by the world’s fourth-biggest oil consumer to build up emergency stockpiles.

Oil prices have almost halved in the past year due to excess global production, leaving traders looking for any signs of new demand to help absorb the surplus.

The sources said state-refiner Indian Oil Corp bought a 2 million barrel cargo of Iraqi crude from Chinese trader Unipec, which will load in May for shipping to the first stage of India’s SPR on the country’s east coast.

In addition, state-refiners IOC and Hindustan Petroleum Corp Ltd will buy another three Very Large Crude Carriers between them for the Vizag SPR storage site in the southern state of Andhra Pradesh.

While the first 8 million barrels for Vizag are relatively small compared with the global market, totalling less than 10 per cent of daily demand, India’s purchases could ramp up later this year as the country completes construction of the next phase.

Two SPR sites, at Padur and Mangalore on India’s west coast, will have a capacity of 29.3m barrels and are expected to be ready by October.

India is heavily reliant on fuel imports, producing less than a third of the nearly 3.7 million barrels per day it consumed in 2013, data from the US Energy In­­formation Administration shows.

Its fast-growing economy has become the world’s fourth-largest oil consumer after the United States, China and Japan.

Published in Dawn, March 31st, 2015

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