India Buys Nigerian & Middle East Oil Instead of U.S. Supply

Post by : Monika

Photo: Reuters

India is one of the world’s largest importers of oil. Because it does not produce enough oil on its own, it has to buy most of what it needs from other countries. Oil is the lifeblood of India’s economy, as it is used to make fuel for cars, trucks, ships, and planes. It is also used in factories and power plants. Every small change in oil prices or buying decisions can have a big effect on the country.

On September 5, 2025, India’s biggest state-run refiner, Indian Oil Corporation (IOC), made an important decision. Instead of buying crude oil from the United States, which it had done recently, IOC chose to purchase oil from Nigeria in Africa and from Abu Dhabi in the Middle East. This decision shows how global politics, trade costs, and price competition all play a role in shaping where India buys its oil.

What Exactly Did Indian Oil Buy?

In the tender (a formal request for offers to supply oil), IOC purchased a total of 3 million barrels of crude oil. This was divided into two main deals:

From Nigeria

1. IOC bought 2 million barrels of oil.
2. The types of oil were Agbami and Usan, both well-known Nigerian crude grades.
3. The seller was TotalEnergies, a French oil and gas company.

The oil was bought under a “free-on-board” (FOB) agreement. This means the seller hands over the oil at the port in Nigeria, and IOC must handle shipping, insurance, and delivery costs to bring it to India.

• From Abu Dhabi (Middle East)
• IOC bought 1 million barrels of oil.
• The type of oil was Das crude, produced in Abu Dhabi.
• The seller was Shell, a global energy giant.
• This sale was made on a delivered basis, meaning Shell will handle the shipping and the oil will directly arrive in India.
• The delivery is expected between late October and early November 2025.
• This shows IOC is mixing both African and Middle Eastern supplies to meet its needs while also spreading out its risks.

Why Did IOC Skip U.S. Oil This Time?

Just a week earlier, IOC had bought 5 million barrels of U.S. West Texas Intermediate (WTI) crude for delivery in October and November. So many were surprised when it decided not to buy any U.S. oil in this tender.

There were several reasons for this change:

1. Higher Landed Cost of U.S. Oil

Even though U.S. crude has often been cheaper on paper, when all extra costs are added—like shipping across the Atlantic Ocean, insurance, port charges, and delivery—the final cost of U.S. oil was higher than Nigerian or Middle Eastern oil.

2. Rising U.S. Tariffs on Indian Goods

The United States recently increased tariffs on some Indian exports, raising them to 50%. This has created trade tensions. India may be trying to avoid depending too much on the U.S. for oil, especially when costs are rising.

3. Shipping Distance and Time

It takes much longer to bring oil from the U.S. to India compared to Nigeria or Abu Dhabi. Nigerian oil travels across the Atlantic and then through the Suez Canal. Middle Eastern oil travels directly across the Arabian Sea. Both are closer and usually cheaper to transport than American crude.

4. Balance of Trade

India has to be smart in balancing imports and exports. Since trade with the U.S. has become more expensive due to tariffs, buying from Africa and the Middle East allows India to keep costs under control.

Why This Matters for India

Oil decisions are not just about money. They affect India’s economy, politics, and future energy plans.

Energy Security: By buying from multiple regions, India avoids being too dependent on one country. This protects it from sudden price shocks or political problems.

Cost Savings: Cheaper oil means lower costs for fuel, which helps reduce inflation in India. If oil is too expensive, everything from food to transport costs more.

Foreign Relations: Choosing Nigerian and Middle Eastern oil shows India wants strong ties with African and Gulf countries. At the same time, it sends a message to the U.S. that India will look for better deals if trade becomes unfair.

How Global Oil Trade Works

For students, it’s important to understand that oil is not just about drilling and selling. It involves:

Grades of Oil: Oil from each country has different qualities. Some are lighter, some are heavier, and some have more sulfur. Refineries choose oil types based on what they can process most efficiently.

Contracts: Oil is bought in long-term deals or through short-term tenders, like IOC did this time.

Delivery Terms: Words like FOB (Free on Board) and Delivered Basis explain who pays for shipping. These details matter because they affect the final cost.

Politics: Tariffs, taxes, and trade deals often change the flow of oil.

Nigeria’s Role in Oil Supply

Nigeria is Africa’s largest oil producer. Its crude, like Agbami and Usan, is known to be light and sweet, meaning it is easier and cheaper to refine into petrol and diesel.

For India, Nigerian oil has long been attractive. It is relatively close compared to U.S. oil and can be delivered at lower cost. Nigerian suppliers are also flexible in offering deals through tenders.

Abu Dhabi and the Middle East

The Middle East is India’s traditional oil supplier. Countries like Saudi Arabia, Iraq, and the UAE (Abu Dhabi) have always been reliable sources. The Das crude India bought from Abu Dhabi is a well-established grade. Since Abu Dhabi is geographically close to India, shipping costs are much lower.

This is why Middle Eastern oil remains a key part of India’s energy basket.

Impact on the United States

The U.S. has become a strong exporter of oil in recent years. Countries like India, China, and South Korea have bought American crude. But the recent U.S. decision to increase tariffs on Indian goods has made trade relations tougher.

By skipping U.S. oil in this tender, India sends a signal that it will not rely only on American supplies. If costs remain high, India will continue to diversify.

How This Affects the World Oil Market

• When a big buyer like India changes its choices, it impacts the global market:
• Nigerian and Middle Eastern sellers benefit because their oil gets more demand.
• U.S. oil exporters may need to lower prices or find other buyers.
• Other Asian countries watch India’s moves closely, as they may follow similar strategies.

A Lesson in Economics and Politics

• Economics: India is saving money by buying from Nigeria and Abu Dhabi instead of the U.S.
• Politics: Tariffs and taxes make deals more complicated.
• Geography: Distance and shipping time play a huge role in costs.

The decision by Indian Oil Corporation to skip U.S. crude and buy oil from Nigeria and Abu Dhabi shows how smart choices are made in global trade. It highlights how costs, politics, and geography all shape energy decisions.

For India, this move helps save money, strengthens ties with Africa and the Middle East, and shows the U.S. that trade tensions can have real effects.

Oil will always remain one of the most important parts of India’s economy. Each purchase decision not only fuels the country but also shapes its place in the world.

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