Little room to cut oil stocks to tackle crude spike: IOC

Regular deferrals of cargo unsustainable, maintaining inventory of 7 days: Chief

Indian Oil Corporation (IOC), the country’s largest refiner, doesn't see much room for cutting oil inventories to deal with the double whammy of a jump in global oil prices and weakness in the rupee, the company's Director (Refineries) BV Rama Gopal said on Wednesday.

The company has deferred taking deliveries of a couple of cargoes of imported crude oil by a few days to fine-tune and better manage its inventories. However, Rama Gopal said it was a "very short term" measure as frequent deferrals of import cargoes were not sustainable.

He said that IOC currently has oil inventory of five to seven days and there is hardly any room to reduce it further. India is heavily dependent on imported oil and meets over 80 per cent of its crude oil demand through imports. Since oil prices are dollar-denominated, a surge in global prices along with a fall in the rupee have led to ballooning of the country's import bill and also pose a challenge for the government to keep current account deficit in check.

On Monday, it was reported that Indian public sector refiners were considering temporarily deferring taking some deliveries of imported crude as a short-term measure.

Rama Gopal did not elaborate further on the deferral of crude cargoes. Since India depends primarily on imported crude oil, deferrals of import cargoes on a regular basis would lead to shortage of crude at refineries in the country. On US sanctions on Iran, Rama Gopal said that Indian Oil was adopting a "waitand-watch approach" and any decision would be taken after Nov 4, when the sanctions of Iranian oil and gas sector come into effect.

The US wants all countries buying oil from Iran to completely stop buy Iranian crude from Nov 4.

As per reports, Indian refiners have heavily reduced oil imports from Iran and they may not buy any Iranian oil in November. India, which meets over 80 per cent of its crude oil needs through imports, is the second-largest buyer of Iranian oil after China.

Among Indian refiners, Indian Oil, Mangalore Refinery and Petrochemicals, and Nayara Energy are the biggest buyers of Iranian crude. It is not clear if the US would be willing to give any waivers, and companies importing oil from Iran may be at risk of attracting secondary sanctions.

The decision to source crude oil from Iran in the future is not just about export sanctions but also about payment channels.