The Trump administration on Monday decided not to renew waiver that let countries like India buy Iranian oil without facing US sanctions.
"Our crude sources are wide. We have alternate sources lined up to make up for any shortfall," a top source said.
US President Donald Trump last year withdrew from the 2015 nuclear deal between Iran and world powers and revived a range of sanctions against the Persian Gulf nation. It, however, granted a six-month waiver from sanctions to eight countries - China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece, but with a condition that they would reduce their purchases of Iranian oil.
India, which is the second biggest purchaser of Iranian oil after China, had agreed to restrict its monthly purchase to 1.25 million tonne or 15 million tonne in a year (300,000 barrels per day), down from 22.6 million tonne (452,000 barrels per day) bought in 2017-18 financial year.
"We have optional volumes (over and above the term contracts) from a number of supplier which we can exercise to make up for any shortfall from Iran," the source said. "We can also go to the spot (or current) market to source crude."
"As far as Indian Oil is concerned, supplies will not be a problem. We have already lined up alternate sources," he said adding the impact of the US decision may reflect on global oil prices which may temporarily go up.
The six-month waiver granted by the US to 8 countries was to expire on May 2.
IOC has the option to take 0.7 million tonne of crude oil from Mexico on top of its committed purchase of 0.7 million tonne during the year. From Saudi Arabia, it has an optional volume of 2 million tonne on top of a term contract of 5.6 million tonne.
Similarly, it has optional volumes of 1.5 million tonne from Kuwait and another 1 million tonne from the UAE.
"We have all the supplies tied up and I think globally crude will be readily available but it is difficult to say what the impact will be on price," the source added.
The price of Brent crude, the global oil benchmark, rose as much as 3.3% to $74.31 a barrel on Monday, the highest intra-day level in almost six months.
When Trump first pulled out of the nuclear deal, oil shot up to over $85 a barrel and it fell to near $50 after the US administration unexpectedly granted the waivers.
US sanctions on Iran's oil buyers snap back next month that will block the US financial system for importers.
India, the world's third-biggest oil consumer, meets more than 80 per cent of its oil needs through imports. Iran in 2017-18 was its third-largest supplier after Iraq and Saudi Arabia and meets about 10 per cent of total needs.
US President Trump in May withdrew from the 2015 nuclear accord with Iran, re-imposing economic sanctions against the Persian Gulf nation. Some sanctions took effect from August 6, while those affecting the oil and banking sectors were to start from November 5, 2018. A six-month waiver was granted that was to expire on May 2.
Iran was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions over its suspected nuclear programme relegated it to the seventh spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 million tonne and 10.95 million tonne, respectively from it.
Sourcing from Iran increased to 12.7 million tonnes in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tonne to catapult it to the third spot.
Iranian oil is a lucrative buy for refiners as the Persian Gulf nation provides 60 days of credit for purchases, terms not available from suppliers of substitute crudes -- Saudi Arabia, Kuwait, Iraq, Nigeria and the US.