Mumbai/New Delhi: Indian oil refiners are readying for more cheap crude following the collapse of the OPEC+ alliance after they recently snapped up unwanted barrels originally destined for China amid the virus-led demand slump.
Oil buyers will be “spoiled for choice,” R. Ramachandran, the refineries director of India’s Bharat Petroleum Corp. said in an interview, after OPEC+ abandoned output cuts following a breakdown in relations between Saudi Arabia and Russia. The supply of high-sulfur crude, which has tightened after U.S. sanctions on Iran and Venezuela, will become more readily available, he said.
Saudi Arabia has slashed pricing for its crude and UBS Group AG estimates the kingdom may boost output next month by more than 10% from March to 11 million barrels a day. While many refiners across Asia have recently cut processing rates due to shrinking consumption on the coronavirus, the outbreak has allowed Indian buyers to purchase cheap and rare cargoes.
“There will definitely be a fight for market share,” said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. Refiners should see better margins in the near term and the price war may lead to an increase in Dubai crude’s discount to Brent, he added, a boon to Indian processors who rely on Middle Eastern supply.
Bharat Petroleum shares added 5.2% on Monday in Mumbai, the biggest advance since October, while Hindustan Petroleum gained 5.7%. About 60% of India’s crude imports were sourced from the Middle East last year.
Brent crude slumped 24% on Monday, the most since January 1991, closing at $34.36 a barrel. The global benchmark clawed back some if its losses on Tuesday, adding as much as 7.3%.- Bloomberg