India starts buying crude oil for strategic reserve: report

India is reported to have contracted the first oil shipment for its strategic petroleum reserve (SPR), as part of building an immediate stockpile of around 8 million barrels of crude.

India, the world's fourth-biggest oil consumer, is building up emergency stockpiles taking advantage of the fall in oil prices. It is reported to be contracting four two very large crude carriers (VLCC) of oil from Iraq and two state-run oil refiners - Indian Oil Corporation and Hindustan Petroleum Corp Ltd - are expected to buy equal quantities of Basra oil.

The government had approved a $330 million budget to cover the filling of its first emergency tanks this year.

With oil prices almost halving in the past year due to excess global production, the Indian order will help traders looking for any signs of new demand.

Reports quoting sources said Indian Oil Corp has bought a 2-million barrel cargo of Iraqi crude from Chinese trader Unipec, which will delivers in May.

With two more large capacity SPRs coming up at Padur and Mangalore on India's west coast by October, India is expected to buy more oil from the global market later this year.

These two SPR sites will have a combined capacity of 29.3 million barrels.

India, which on an average consumes 10 million barrels of oil per day, produces only 3.7 million barrels per day of crude and is dependent on imports for almost 70 per cent of its needs.

While China, a bigger consumer may slow its purchases for SPR as it has little space left, other smaller countries like Myanmar have started buying and stockpiling oil, which could push up oil prices in the international market.

There were, however, no immediate gains for oil as Brent crude oil prices were down by around $1 a barrel near $55 a barrel on Monday.