Petroleum Minister Dharmendra Pradhan said two state-owned oil refiners, Indian Oil Corporation and Mangalore Refinery and Petrochemicals, had signed contracts to import 1.25 million tonnes of Iranian oil next month, Mint newspaper reported.
Iran's crude exports fell further in the first week of October, according to tanker data and an industry source, taking a major hit from USA sanctions and throwing a challenge to other OPEC oil producers as they seek to cover the shortfall.
According to an executive order (EO 13846) issued by President Donald Trump, all American and non-American entities were given a six-month "wind-down" period from May 2018, in which to "zero out" all transactions with designated Iranian oil companies and port operators.
Oil dropped below $83 a barrel on Monday, pressured by expectations that some Iranian oil exports will keep flowing after the US reimposes sanctions, easing a strain on supplies.
"Likely, India and Iran will agree to use Rupee payments instead of United States dollar payments, something already tried between 2013 and 2015, with Iran then using Rupees to import food, medicines and other commodities from India", said Leszczynski.
The Trump administration reimposed an initial tranche of economic sanctions on Iran in August, and will implement a second tranche in November.
India, the world's third-largest oil importer, is a major importer of Iranian oil.
The International Monetary Fund (IMF) estimates that Iran's economy fell into a recession this year that will get worse next year as a result of renewed USA sanctions on Tehran. An industry source who also tracks exports said October shipments were so far below 1 million bpd.
"We're already seeing demand outstripping supply", said Fiona Howarth, CEO of Octopus Electric Vehicles, a British car-leasing company.
Worldwide benchmark Brent crude traded at around $83.38 on Monday, down almost 1 percent, while U.S. West Texas Intermediate (WTI) stood at around $73.81, around 0.7 percent lower.
The supply picture right now is currently looking worrisome, with Venezuela and Iran supporting to drive prices higher. Since the start of September, prices had spiked by over 10 per cent reaching a four-year high despite the fact that at the Algiers meeting last month OPEC had declared that the market was comfortably supplied. The Indian basket represents the average of Oman, Dubai and Brent crude.
The Minister also categorically stated that the government's directive to oil companies to absorb a Rs. 1 per litre hit to the price of petrol and diesel was not a reversal of the deregulation of oil prices.