India Trying to Build Oil Buffer

India’s got an oil problem.
The country’s lightning-fast growth rate is fueling increased demand for crude. Yet India doesn’t pump much oil at home, forcing it to rely on foreign imports.

India also lacks a strategic petroleum reserve, or emergency stockpile, that would protect against supply disruptions.

Now India is trying to build a buffer. The country’s new budget allows foreign oil companies to avoid taxes on crude that is stored in the country. At the same time, India is working to build vast underground caverns that can be used to store petroleum.

It’s a shrewd strategy given the crash in crude prices and excess supply being pumped by OPEC nations like Saudi Arabia and Iraq.

“Entering into relationships with oil producers in the Middle East makes a great deal of sense considering India’s consumption is continuing to grow and they don’t have the oil themselves to meet that demand,” said Matthew Smith, director of commodity research at ClipperData, which tracks global movements of crude oil cargo on sea.

via CNN

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza