Nayara Energy

Private Refiners Corner 46% of Cheap Indian Crude Imports from Russia

For the fifth consecutive month in April, India remained the largest buyer of seaborne Russian crude oil, with inbound shipments growing to 1.63 million barrels per day.

New Delhi: Private Indian refiners such as Mukesh Ambani’s Reliance Industries and Russian state-run oil giant Rosneft-backed Nayara Energy accounted for almost 46% of the total Indian crude imports from Russia in April, according to data shared by energy intelligence firm Vortexa with Hindu Business Line.

They imported 524,000 barrels per day of Ural grade, followed by 123,000 b/d of ESPO, 67,000 b/d of Varandey, and 35,000 b/d of Arco in April.

For the fifth consecutive month in April, India remained the largest buyer of seaborne Russian crude oil, with inbound shipments growing to 1.63 million barrels per day. India became Russia’s largest buyer of seaborne crude in December last year, with imports of around 1.22 mb/d. Since then, inbound shipments have been more than 1.22 mb/d every month, said the newspaper.

The discounted Russian oil has helped India meet the growing demand for petroleum products, with 222.30 million tonnes of petroleum products consumed in FY23, 10.2% higher than the year before. However, the government has not passed the benefits of cheap crude prices to the consumer as pump prices have remained unchanged since April 2022.

Mint reports that the steep discounts enjoyed by India on Russian crude oil through most of FY23 have plunged in April. India was earlier able to secure discounts of as much as $15-20 a barrel from Russia on delivered-at-place basis but this has since fallen below $10 and has touched even $5, the newspaper reported, citing two government officials aware of the development.

This comes in the backdrop of a $60 per barrel price cap imposed by a US-led global initiative along with G7 countries, the European Union and Australia that was to be revised in March. Meanwhile, the Organisation of the Petroleum Exporting Countries (OPEC) plus grouping, including Russia, has announced an additional 1.16 million barrels per day of supply cut that takes effect next month.

India’s import of crude oil and petroleum products rose 29.5% to $209.57 billion in FY23. It is dependent on imports for as much as 87% of its oil needs and 55% of its natural gas demand.

India May Look to Lock in Oil Futures to Stem Rupee Slide

The government is expected to announce a set of measures to discourage non-essential imports to stem the slump in the currency.

New Delhi/Mumbai: India’s government is planning to ask state oil firms to lock in their crude futures purchase prices, a government source said on Thursday, anticipating a spike when US sanctions on Iran snap back again in November.

The move would be another step to tackle a slide in the rupee, as oil prices are putting pressure on India, which imports some 80% of its crude demand. Its currency has fallen sharply this year against the US dollar, amid a wider sell-off in emerging markets.

“The futures should be locked in when crude price is down,” said the source, who is familiar with deliberations on the matter, adding the step should have been taken earlier.

The rupee, Asia’s worst performing currency this year, has depreciated about 12% year-to-date against the US dollar, closing at 72.39 on Wednesday, after a record low of 72.99 on Tuesday. Markets were closed on Thursday.

The government is expected to announce a set of measures to discourage non-essential imports to stem the slump in the currency.

Separately, a senior finance ministry official said there was a view that the rupee could weaken further in the next two months if proposed steps failed to kill “speculation in the rupee market”.

“The gap between the announcement of steps and action is creating a space for speculation. We have to stop this,” said the official.

Officials at oil companies said they were open to the idea of locking in futures if the government asked.

A senior official at Indian Oil Corporation, a state-owned oil marketing company, said they were considering some options in terms of forward contracts. He declined to give details saying this was “market sensitive information”.

An official at BPCL, another state-owned oil firm, said they were trying to hedge margins, under a policy reviewed every quarter.

BPCL is also studying a proposal to buy dollars directly from the Reserve Bank of India instead of the market, in a bid to quell strong dollar demand that is denting the rupee.

“Whenever, there is sharp volatility in exchange rates, this dollar window is opened. We’re studying the proposal,” he said.

Another official at state-run HPCL said the government had not officially asked for it to examine forward contracts.

“In case it is needed, or the government wants us to, we will then look into it,” the HPCL official said.

The officials declined to be named as the proposals are still under consideration.

India’s risk-averse state-owned refiners have in the past been reluctant to engage in hedging strategies, fearing administrative blow-back if bets go wrong.

The refiners typically buy up to 70% of their oil needs through term deals and the remainder through spot markets.

Unlike state refiners, private players Reliance Industries and Nayara Energy use hedging tools to lock in costs on the international market.

(Reuters)

Indian Oil Refiner Part-Owned by Iranian Company Cancels Iran Oil Imports

India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect.

New Delhi: India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect, three sources familiar with the issue said.

Iran’s Naftiran Intertrade Co Ltd, a trading arm for state-owned National Iranian Oil Co, owns a 15.4% stake in Chennai Petroleum, which has two refineries with a total combined capacity of 230,000 barrels of oil per day (bpd).

In May, US President Donald Trump pulled out of an international nuclear deal with Iran and announced new sanctions against the country, the third-largest producer among the Organisation of the Petroleum Exporting Countries (OPEC). Washington is pushing allies to cut Iranian oil imports to zero once the sanctions on the petroleum sector start up on November 4.

United India Insurance has informed Chennai Petroleum that its new annual policy that is set to take effect from October will not cover any liability related to processing crude from Iran, the three sources said. This has forced the refiner to cancel a scheduled loading of 1 million barrels in October, they said.

Indian insurers do not fall directly under the sanctions, but need to hedge their own risk on the Western reinsurance market, which will not accept Iranian exposure.

“It is quite complicated.. reinsurers are quite apprehensive about extending cover for Chennai Petroleum,” said one of the sources, who asked not to be identified because of the sensitivity of the issue.

Chennai Petroleum’s reduced demand will further cut India’s imports from Iran to about 10 million tonnes in October, lower than previous estimates reported by Reuters.

“Reinsurers have said they can not provide full 100% cover. They have agreed to provide support for only 85% cover,” said a second source, who also declined to be identified.

Chennai Petroleum, a subsidiary of the country’s biggest refiner Indian Oil Corp (IOC), has a deal to buy up to 2 million tonnes, or 40,000 bpd, of oil from Iran in the fiscal year 2018/19.

IOC imports oil on behalf of Chennai Petroleum.

Chennai Petroleum and United India Insurance did not respond to requests for comment.

With Chennai’s absence, Iran is left with just two Indian clients, Mangalore Refinery and Petrochemicals Ltd, and IOC.

State-owned refiner Hindustan Petroleum Corp has already halted purchases due to insurance problems, while Bharat Petroleum Corp boosted Iranian purchases earlier this year and expects to sharply cut Iranian flows once the sanctions take effect.

Nayara Energy is also preparing to halt Iranian imports from November, while Reliance Industries and HPCL-Mittal Energy Ltd have already stopped buying Iranian oil.

(Reuters)