Crude runs have been cut back owing to near-term headwinds such as higher fuel prices and localized lockdowns to prevent the spread of coronavirus
Indian refineries are not contracting higher crude supplies as demand slows on account of near-term headwinds such as higher fuel prices and localized lockdowns, according to S&P Global Platts.
This comes against the backdrop of the national capital being placed under a 10pm-5am daily curfew until the end of the month and Maharashtra and Rajasthan putting curbs in place in an attempt to contain coronavirus transmission.
“Indian refiners are holding back crude runs as demand slows, with headwinds ahead in the near term, including high fuel prices and localized lockdowns due to rising cases of covid-19," said Lim Jit Yang, adviser for Asia-Pacific oil markets at S&P Global Platts Analytics in a statement on Wednesday.
India, the world’s third-largest oil importer, spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19.
“Platts Analytics expects India's oil demand in 2021 to remain slightly below the 2019 level due to weakness in the first half but will register a growth of 440,000 b/d on the year, after declining 470,000 b/d in 2020," the statement said.
India is a key refining hub in Asia, with an installed capacity of over 249.36 million tonnes per annum (mtpa). It has 23 refineries and plans to grow its refining capacity to 400 mtpa by 2025.
“Average run rate at all Indian refineries slipped to 97% in February from 103% in January, oil ministry data showed, compared with the February 2020 run rate of 111%. For the April-February period, average run rate stood at 88%, compared with 102% level the year-ago, reflecting the overall impact of the coronavirus lockdown," the statement reads.
The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, was at $60.93 a barrel on 7 April. Following the covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April before recovering to $64.73 a barrel in February, data from the Petroleum Planning and Analysis Cell showed.
“India's demand for oil products in February fell 4.9% on the year to 17.2 million mt, or 4.8 million b/d (barrels per day), latest data from the Petroleum Planning and Analysis Cell showed, reflecting weakness in its economy and the fallout of higher global crude prices," the statement reads.
“Demand for diesel fell 8.5% on the year to 6.6 million mt, while demand for gasoline fell 3% on the year to 2.4 million mt in the same month," the statement added.
This also comes at the time of US crude oil exports to India jumping to 2.11 million metric tonnes in February, helping it dislodge Saudi Arabia as the second largest supplier to India. The Indian government is working on diversifying the country’s energy basket with crude oil supplies from non-Organization of the Petroleum Exporting Countries (Opec) sources, after the Opec-plus grouping’s decision to retain supply curbs.
“Overall, Indian refiners processed 18.62 million mt of crude oil in February—an average of 4.87 million b/d—down 11.84% year on year. The February volume was 14.63% lower from January levels," the statement reads.