Indian ref iners to get rare oil cheap

Indian refining companies are snapping up rare crude grades as the coronavirus outbreak curtails China’s demand for processing, executives and traders said, with prices for some grades falling by as much as 15 per cent.

Chinese refiners have slashed output by at least 1.5 million barrels a day in February, or over 10 percent, after the virus outbreak hit domestic fuel demand, leading to swelling stocks.

“Opportunity for Indian markets is more in the context of what is happening in China. In recent times, we received crudes which are appearing to be attractive as compared to their value earlier,” said R Ramachandran, head of refineries at Bharat Petroleum.

Refiners in India, the world’s thirdbiggest oil importer, rarely get the opportunity to buy suitable grades from areas like the Mediterranean and Latin America because of higher freight rates.

However, shipping rates have plunged by nearly half since the virus outbreak, and after the US partially lifted sanctions on part of Chinese shipping firm COSCO. BPCL will receive a million barrels each of Brazil’s Sapinhoa and Mediterranean CPC blend in April, Ramachandran told Reuters.

It is also scouting for a million barrels each of Angola’s Palanca, a grade BPCL processed years ago, and Nigerian Okoro “as pricing appears attractive” for April, he said.

“This is an opportunity for Indian refiners to buy new and rarely-purchased grades that are available at cheaper rates,” said Sri Paravaikkarasu, director for Asia oil at consultancy FGE.

Asia’s spot premiums for West Asia, Russian, West African and Brazilian crude have all dropped this month with grades favoured by Chinese buyers, such as ESPO, Lula, and Angolan, hurt the most.

“For the Brazilian and CPC blend we have seen crude cost lower by 10-15 per cent compared to what we used to see,” Ramachandran said.