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Any dramatic implications of the output freeze by OPEC members on the prices at which Indian refiners buy their crude oil will be seen only in the second half of 2016 when the current supplies start draining out.
A senior executive from a public sector refiner told BusinessLine that, “We (the buyers) were also looking for stability in pricing as the constant fluctuations were making it difficult for us to manage our inventory losses/gains.
“In the immediate months we do not foresee any drastic impact on prices (of the four producers proposing to freeze their output) as there is sufficient supply in the market.”
Though low oil prices have helped India reduce its import bills, there was always an element of uncertainty with the constant fluctuations in the market. The refiners say that when the price regime is stable, it is easier to manage their inventory and plan capital expenditures.
Brent averaged at $30.69 a barrel in January 2016, while the Indian crude basket averaged at $28.08 a barrel. Indian crude price basket is the rate at which the domestic refiners buy their oil.
During the first half of the fiscal 2015-16, India imported the maximum amount of crude oil from Saudi Arabia (19.6 per cent), followed by Iraq (17.11 per cent), Nigeria (11.66 per cent) and Venezuela (10.96 per cent). Qatar only had a 1.2 per cent share in India’s imports while Russia’s was even lower at 0.41 per cent.
The domestic refiners in the April-December period imported 149.416 million tonne of crude oil which is five per cent more than 142.237 million tonne imported in the same period last year. However, the cost of crude oil imports during the period April-December 2015 came down 41 per cent to ₹3,41,067 crore against ₹5,81,744 crore in the same period last year, according to official data.
All eyes on OPEC However, if OPEC members do not endorse this move, then there is a fear of prices crashing and destabilising the market.
“The real test will be once all the OPEC members agree to it. However, if all the OPEC members do not come on board, the after effects could be adverse on the prices,” said RS Butola, Former Chairman IndianOil Corporation.
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