India and the US may seal a larger crude oil supply deal during the visit of President Donald Trump later this month with diplomatic sources indicating that American oil companies are coming with offers that would make it attractive for indian companies to increase oil imports from US despite the longer distance and higher freight.

Sources said big oil producers from the US are willing to step up shale oil supplies to India by offering importing companies a discount of upto $ 5 per barrel over global benchmarks. This is expected to make US oil attractive even over Dubai crude that makes up for most of Indian oil imports now.

Also on the table would be freight discounts and a higher credit period of 60-90 days to Indian importers on the lines of what Iran used to offer India before sanctions squeezed oil supplies from the gulf nation.

"We expect to increase oil imports from US next fiscal and sweetened deals would help us increase the quantum of buys. The hope is that few contracts may be signed during the visit of US President or later next month," said an executive of PSU oil company asking not to be named.

Another government official said that the idea is to more than double country's oil imports from the United States next year and contracts would be facilitated if better concessional terms are offered.

"The shipment of US oil to India has already increased over the past two years and we may end up importing close to 10 million tonnes (mt) in the current fiscal year. This would be doubled in FY21 if official and company-level negotiations taking place for some time yield positive results," said the official.

If this level of oil imports is doubled in FY21, the US will reach close to meeting India's 10 per cent oil import needs, the same what Iran was meeting prior to the supply squeeze post sanctions.

In the current fiscal (FY20), oil imports from Iran have dipped to 1.97 mt, down from 23.9 mt in FY19. Iran used to meet more than 10 per cent of country's total oil imports.

But since last fiscal, the Iran oil squeeze is being compensated through higher supplies by Iraq, the UAE and Saudi Arabia. During the period, imports of US oil have also increased to 6.2 mt in FY19 from a level of mere 1.9 mt in the previous year. In the April-December period of this fiscal, import of US oil has already crossed last year's import figures.

Diplomatic sources said the talks between Indian and US officials on increased oil support by US has progressed smoothly since last year during Prime Minister Modi's US visit. In fact, the 'Howdy Modi!' event was also used to negotiate possible deals with US oil companies to meet the growing needs of world's third biggest oil importer. That time too, the US had indicated its intent of supplying increased quantities of oil and gas to India on a short notice to prevent the country from facing any shortages.

Though Indian oil companies have started importing oil from the US for the past couple of years, the quantity remains miniscule, forming just about 3 per cent of the country's total oil imports. But the quantity can grow with US shale oil market becoming relevant again at current crude levels and an increase in total rig count again in December-January period in the world's largest oil-guzzling nation.

"The rig count in the US had slowed in the second half of FY20 but has again picked up in last few weeks. The domestic rig count will be largely stable, at least through the first six months of the year, as companies spend their drilling budgets for the year and prepare the field to quickly execute on their budgets for the first half of the new year. This would make higher quantities of US oil for exports," said an oil sector analyst who did not wish to be named.

India's shift to US would not be sudden as gas transportation company GAIL, oil marketing firm Bharat Petroleum Corporation Ltd (BPCL) and country's largest oil refiner Indian Oil Corporation, have sealed deals for supplies of the US crude earlier as well. The shale oil price there has also become very competitive in comparison to Middle-East and Gulf crude.