NEW YORK/NEW DELHI: India is set to emerge as a key market for American crude exports in coming months, as refineries in that country are ramping up “test” purchases of US grades to diversify their imports.


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US exports recently set a weekly record with nearly 2 million barrels of crude a day sent overseas. But shipments to India have been rare, with just a few deliveries since the US lifted its ban on crude exports in late 2015.


Indian refineries are starting to increase purchases as the country seeks to secure more supply from outside the Middle East. Refiners are testing both US sweet and sour crudes in their facilities, a common practice when importing crude from new sources.


“A lot of these (Indian refiners) want to see what it’s like if they run it,” said one Houston-based oil broker. “They want to get a taste of US crude.”


Those refiners are taking advantage of a wide spread between US oil and other global benchmarks, which has created an attractive discount on American crude grades.


Foreign refiners, including those in India, have bid up those physical grades against the US crude benchmark to multi-year highs, traders and brokers said. That includes onshore grades from the Permian Basin in West Texas and the Eagle Ford further east, as well as offshore US Gulf grades including Mars Sour and Southern Green Canyon.


In June, Indian Prime Minister Narendra Modi and US President Donald Trump met and discussed energy exports to India. Since then the Modi administration has been encouraging more crude imports by waiving some shipping requirements.


Indian refiners Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corporation Limited were given a special permission by the shipping ministry to import oil from the United States until March.


“They’ve been stepping up to be a sizeable importer; they’re looking to diversify away from the Middle East,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.


The executive of India’s state-owned Hindustan Petroleum Corp Ltd said in August the company was assessing whether US crude could replace Nigerian barrels; it made its first buy of US oil in September.


One supertanker carrying nearly 2 million barrels discharged in India earlier this month, according to Eikon shipping data, while two other vessels carrying a combined 3 million barrels are set to arrive in November.


Prior to this, US crude rarely went to India, with only one month this year - February - showing deliveries, according to US EIA data through July.


In August, IOC bought 950,000 barrels of light sweet Eagle Ford shale oil and 950,000 barrels of heavy sour Mars crude for end-October delivery from trading firm Trafigura. In October the company bought 1 million barrels each of US Southern Green Canyon (SGC) and WTI Midland crude.


In October, India’s Reliance Industries Ltd, the world’s largest refining complex, purchased 1 million barrels of Midland and a similar-sized cargo of Eagle Ford crude for November delivery.