India Slashes Oil-Refining as More Cuts Seen on Lockdown

India Slashes Oil-Refining as More Cuts Seen on Lockdown

(Bloomberg) — India’s oil refiners are slashing crude-processing rates as a three-week lockdown to stem the spread of the coronavirus pandemic crushes energy demand in the second-most populous country.

Even as refiners in Asia, Europe and the U.S. cut the amount of crude they’re processing due to the loss of demand, the market is poised to be swamped with a flood of barrels from Saudi Arabia and Russia after the acrimonious break up of the OPEC+ alliance. Goldman Sachs Group Inc. is predicting a “harsh shock” for refiners as the global glut swells in the second quarter.

See also: FGE Sees Indian Diesel Demand Taking Biggest Hit From Lockdown

Indian Oil Corp., the nation’s biggest refiner, said it’s cutting crude processing at most of its plants by 25% to 30% after Prime Minister Narendra Modi ordered Indians on Wednesday not to leave their homes until mid-April. Refiners across the country plan to slow operations even further, according to estimates from one of India’s biggest Middle Eastern suppliers.

Refiners are poised to reduce run rates by between 40% to 50% below normal capacity during the lockdown, according to a person with knowledge of that supplier’s Indian business. An Indian oil ministry spokesperson declined to comment on Wednesday about the estimates of further run cuts.

“The nationwide lockdown could depress India’s oil demand by up to a third,” according to Vandana Hari, founder of Vanda Insights in Singapore. “Refiners are in a tough spot. Though crude prices are languishing not far from 18-year lows, products demand is down and margins have been squeezed.”

Consumption of gasoline, diesel, fuel oil and bitumen has already declined substantially, Indian Oil said in a statement Wednesday. The refiner, which is also the nation’s biggest fuel retailer, has already filled its storage tanks with refined products to meet future demand once the lockdown is lifted.

Indian Oil controls 11 of India’s 23 refineries, with a capacity to process 80.7 million tons of crude oil annually, or 1.62 million barrels a day. It also has more than 29,000 fuel stations across the country.

India imported about 4.5 million barrels of crude on average each day over the past 12 months with the country’s main suppliers including OPEC members Iraq, Saudi Arabia, the United Arab Emirates and Nigeria.

©2020 Bloomberg L.P.

 

Bloomberg.com

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