The company did not purchase any Iranian crude in February and March, the sources said. Reliance, which operates the world's biggest refining complex, imported 90,000 barrels per day (bpd) of crude from the Islamic republic in 2009.
Reliance did not respond to Reuters enquiries on the move, while Iranian officials declined to comment.
It is not immediately clear why Reliance is not renewing its annual import deal with the world's fifth-largest oil exporter but traders said it could be due to disagreement over prices at a time the refiner has easy access to other competitive grades.
Political pressure from the United States and its allies, who are seeking to force Iran to stop its nuclear programme with a tougher sanctions regime, may be another reason, traders said.
This comes as Japan's imports of Iranian crude in 2010 are expected to fall 11 percent on year to the lowest level in 17 years, industry sources say, as lower consumption, high prices, and political pressure soften demand for crude from the OPEC producer.
Reliance's sophisticated refining complex at Jamnagar in the western Indian state of Gujarat can process 1.24 million barrels per day (bpd) of crude as diverse as light West African to heavy sour Middle Eastern grades, allowing to switch suppliers to take advantage of the lowest-priced crudes.
The wide acceptance among Asian refiners of Russia's new ESPO Blend crude offers another supply option to Reliance, traders added.
"It could be that they are not happy with the general reluctance of NIOC to drop their prices especially with more attractive competing grades like Russia's ESPO coming onto the market," an Asian-based crude trader said.
Crude from Russia's East Siberian-Pacific Ocean (ESPO) is gaining favour among refiners in Asia because of its attractive price and quality versus the heavier sour crudes from the Middle East.
"Reliance has been importing mainly Soroush and Nowruz (crude grades) from Iran, this is very heavy and extremely sour," a trader said.
"If they can get a crude that is lighter and less sour and pay less, why would they not do it, at the end of the day they want to maximise their yields."
ESPO's API gravity is around 34 degrees, with sulphur content pegged at around 0.6 percent, whereas Iran's Soroush and Nowruz have a sulphur content of up to 3.5 percent with the API measured at about 18 to 19. API is a measure of how light or heavy a crude is in relation to water.
IRAN SANCTIONS
"There is some politics involved with this as well, and at some level there seems to be a general move by people to distance themselves away from dependance on Iran as a crude supplier," a trader said.
Six world powers, including China, agreed on Wednesday to start drawing up new sanctions on Iran over its nuclear plan in the next few days, the U.S. ambassador to the United Nations said.
Iran rejects Western claims that the goal of its nuclear programme is to develop the capability to produce atomic weapons, insisting that it is for electricity generation.
U.S. politicians are also working on legislation to slap sanctions on suppliers of fuel to Iran as a means of piling pressure on the OPEC member.
The halt in Iranian oil supplies to Reliance and slowdown to Japan comes as the Islamic republic continues to produce above its OPEC quota, with compliance among all OPEC members at just 50 percent of agreed cutbacks.
In March Iran produced 3.8 million bpd of crude, versus its quota of 3.34 million bpd, and traders said that Tehran is likely to look to increasing its exports to China, which overtook Japan as Iran's top crude buyer in 2009, to absorb its excess output.
China has stood firm on its stance that sanctions are not an effective tool to solve diplomatic disputes.
Reliance stopped shipping gasoline to Iran in May 2009 due to U.S. pressure, as it looked to increase its market share for its fuel in the United States.
Last month, it was reported that oil trading firms Trafigura and Vitol have halted gasoline sales to Iran. (Editing by Ramthan Hussain)
