India hopes for quick return of Iranian, Venezuelan crude to mitigate price drop

Strong points

IOC and other refiners buy Russian crudes on spot

‘Tiny’ Russian imports in import basket, minister says

High prices are beginning to weigh on domestic fuel demand

India is feeling the pinch of exorbitant crude prices, but refiners are pinning their hopes on a quick return of Venezuelan and Iranian oil to ease the situation instead of aggressively turning to discounted Russian crudes, which many refiners do not. are not accustomed to dealing in a larger scale.

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Although some refiners are picking up Russian shipments on a spot basis, analysts said the volumes are not large enough to displace entries from traditional suppliers, such as the Middle East, the United States, Latin America and the United States. Africa.

“We need a total of five million bpd of crude. About 60% comes from the Gulf. We imported from Russia only 0.419 million tonnes in the April-December period of the current fiscal year 2021 -22 (April-March). This is only 0.2% of the total requirement. Even if we increased this significantly, it would still be a drop, literally, in a bigger bucket,” Hardeep Singh Puri, Minister recently said. Indian Oil, in Parliament.

“As far as oil imports from Russia are concerned, contrary to what is said in the media, it is tiny,” he added.

But Puri acknowledged that Indian buyers had contracted about three days’ worth of the country’s oil needs from Russia, which would be supplied over the next three to four months.

“Some state refiners are watching Russian crude bids and buying Russian barrels because the prices are attractive,” an industry source said.

In a recent tender, Indian Oil Corp. reportedly took three million barrels from the Urals for loading in May. This follows the refiner’s earlier purchase of three million barrels of Urals crude for delivery the same month.

“At present, the oil public sector companies have no such contracts or proposals pending from Russia or any other country for the purchase of crude oil in Indian rupees “, Rameswar Teli, India’s deputy oil minister, told parliament.

For many Indian refiners, buying a lot of cut-price Russian cargo may not be a good thing to do. Most refiners have their fuel production plans, as well as linear refinery programming models to consider before drastically changing their crude slates.

Iran, Venezuela

“We hope and expect that oil, not only from Venezuela, but from other countries under sanctions, will become available. We will all collectively use our margin of persuasion to call on the international community to make more oil available, including from Venezuela. ,” Puri said.

“Apart from the oil that will become available to countries that until now have not been supplying because of the sanctions, the more existing OPEC will increase production,” he added.

OPEC and its allies approved another modest increase in oil production on March 31, saying they saw no need to respond to oil disruptions from the war in Ukraine led by key member Russia. The OPEC+ deal called on the alliance of producers from 23 countries to increase production by 432,000 bpd in May.

This is a slight increase from previous monthly increases of 400,000 bpd, but below what S&P Global Commodity Insights analysts expected for Russian crude shutdowns of 2.8m bpd. j from the end of April to the end of 2022.

Indian government officials added that the additional volumes from Russia would not affect purchases from countries such as the United States, which were trending upwards.

In the fiscal year 2020-21 (April-March), India imported 14 million tons of crude oil from the United States, which represents more than 7% of the country’s needs against less than 1% of the Russia, government officials said.

“Based on the current trend, 14 million tons would increase to 16.8 million tons, or $10 billion in crude oil imports from the United States this year,” Puri added.

India’s Finance Minister Nirmala Sitharaman also told parliament that the ongoing conflict between Russia and Ukraine has brought new challenges, including rising oil prices, as well as disruptions to supply chains.

Destruction of the request

The country’s demand for petroleum products rose 5.4 percent year-on-year to 17.57 million tonnes, or 4.9 million barrels per day in February, according to the latest provisional data from the Planning and Development Unit. analysis, reflecting a recovery in industrial and consumer demand after the third wave of COVID-19. But it was down 0.2% month-on-month on higher global crude prices. Analysts said demand destruction was starting to take hold.

“Persistently high oil prices will likely intensify inflationary pressure and dampen India’s fragile demand recovery, especially as retail fuel prices have risen almost daily since March 22 shortly after the national elections,” said Lim Jit Yang, adviser for Asia-Pacific oil markets at S&P Global.

Prior to the recent hikes, retail fuel prices had remained almost the same for four months since November 2021 after the government announced an excise duty cut on petrol and diesel prices. Crude oil prices have risen nearly 60-70% since then, putting pressure on oil marketing companies’ margins and further retail price increases are expected to follow, which will become increasingly an obstacle to the recovery of demand, he added.

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