Indian Oil Corporation (IOC) has signed a deal to buy 3 million tonnes of crude worth $1.5 billion from the United States during the next fiscal.

The deal, which is the first ever by an Indian firm, is seen as an attempt to strengthen strategic energy cooperation between the two nations and reduce the trade deficit.

While the oil deal will help the state-owned refiner to diversify its crude sources, analysts see this as a prelude to cut the quantum of oil import from Iran when the Trump administration takes up the Iran sanction waiver for review.

“IOC has finalised a term contract to import up to 3 million tonnes (mt) of crude oil of US origin as part of its strategy to diversify term crude sources,” the IOC said.

This is the first time any Indian refiner has signed an annual contract since the country in 2017 began importing crude oil from the US.

The state-owned firm buys about 75 per cent of its oil needs through long-term deals, mostly with national oil companies of West Asian countries.

Oil imports from the US during the April-December period of 2018 increased 294 per cent to 4.58mt compared with 1.16mt imported in the same period in 2017, according to government’s trade data.

“The energy trade with the US will result in bringing down America’s trade deficit with us. However, it does not mean that we will stop importing from Iran,” an official said.

The US had imposed trade sanctions against Iran but allowed eight countries, including India, to import till the end of April 2019.

Analysts said Washington could reduce the number of countries getting waiver. However, it could allow India and China, top buyers of Iranian crude, to continue imports, but could put condition on the quantum of crude off-take.

Further, the US will keep the oil market from over-heating by entering into supply contracts with the two major energy consumers and pump more oil into the market to prevent crude from spiking.

India and the US are looking to increase their trade and strategic engagements and have set up several working groups, including one on energy, which would come up with specific recommendations to boost ties between New Delhi and Washington.

India’s ambassador to the US had reportedly told the American business leaders last month that India has committed to buy oil worth $5 billion in 2019 and defence equipment worth $13 billion.

India's exports to the US in 2017-18 stood at $47.9 billion, while imports were $26.7 billion. The trade balance is in favour of India.