India’s crude imports surged to 5 million b/d in October to register the highest monthly inflows in more than seven years as refiners rushed to ship in cargoes amid doubts on whether New Delhi would win a waiver on Iran.
But with India figuring in the list of eight countries that have secured temporary waivers from Washington, analysts and market sources said that the urgency to bring in cargoes had subsided, meaning overall imports from November onwards could ease from October levels.
India’s October crude oil imports surged to 21.02 million mt, or 5 million b/d, registering a 10.5% year-on-year growth. It was also up 17.3% from September levels. The volume was the highest since April 2011, data from the country’s Petroleum Planning and Analysis Cell showed.
“In October, India boosted its crude purchases from Africa as it sought to diversify its crude imports ahead of the sanctions on Iran,” Kang Wu, Head of S&P Global Platts Analytics, Asia said.
Even higher refinery runs and inflows into strategic petroleum reserves boosted volumes.
“Strong refinery runs coupled with India starting to fill SPRs boosted October imports, although with refinery maintenance starting in November, imports should come off,” Amrita Sen, chief oil analyst at Energy Aspects said.
Among the key refinery turnarounds, Nayara Energy plans to close its 400,000 b/d Vadinar refinery in November to carry out a month-long maintenance.
Indian public and private-sector refiners processed 21.88 million mt, or an average 5.2 million b/d, of crude in October, 5% higher than September levels, oil ministry data showed. The average utilization rate of refineries was 107.5% in October, compared with 102.5% in September.
“For 2019 and 2020, we anticipate that refining runs in India will rise further,” Kang said.
Sri Paravaikkarasu, director for oil at Facts Global Energy said that Indian crude imports seasonally surge in October as refiners run at elevated rates to cater to strong year-end demand.
“Nevertheless, the scale with which imports increased this year has surprised the market,” she said.
“There was frenzied crude buying during August-October as refiners were nervous about the soon-to-come Iranian sanctions. US President Donald Trump’s earlier hard stance on Iran clearly wobbled Indian refiners and they did all sorts of things to optimize crude purchases. Diversifying crude imports became the heart of the issue,” she added.
India has recently said it would be looking to ship in more crude oil from Saudi Arabia and the United Arab Emirates to fill part of the vacuum created by reduced appetite for supplies from Iran. Both Saudi Arabia and the UAE have recently highlighted that they had capacity to supply incremental barrels to India.
Indian crude imports from Iran continued in the range of 200,000-250,000 b/d during previous sanctions on Iran. After the sanctions were lifted in 2016, Indian state-owned refiners stepped up Iranian crude imports as Iran offered steep discounts on freight. In addition, Iran allowed a 60-day credit on oil purchases, making it lucrative for Indian refiners.
Analysts said that in the absence of clarity on exactly how much crude India would be able to ship in as part of the waiver, many refiners would limit their intake of Iranian crude despite the waiver and would continue to look at other sources.
“What the market is really interested in, is the volume these waivers allow each country to import,” ING Economics said in a research note.
Kang added: “Given the uncertainty over Iran under the US government’s watch, India is likely to limit Iranian imports going forward and increasingly look elsewhere for its rising crude oil import requirements.”
In the first 10 months of 2018, India’s crude imports rose 7.2% to 190.7 million mt, from 177.92 million mt in the same period a year earlier, PPAC data showed.
“US waivers on Iranian crude imports earlier this month came as a big ‘temporary’ respite for Indian refiners. India imported about 466,000 b/d from Iran in October. The waiver will ascertain flows of some 300,000-350,000 b/d of Iranian cargoes through March at very competitive prices,” Paravaikkarasu added.
In addition, leading Indian refiners and buyers of Iranian crude have in recent years diversified their crude strategy by increasing their spot purchases and reducing term volumes. That would help to fill their needs as and when prices became attractive.
“Over the years we have not increased our term volumes at the same rate as boosting capacity. That will give us more flexibility in terms of picking up spot cargoes,” Sanjiv Singh, chairman of state-run Indian Oil Corp. told S&P Global Platts recently.
Source: PlattsPrevious Next
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