Bharat Petroleum Corporation Limited (BPCL), one of the biggest Indian state-owned refiners, will reduce its purchases of crude oil from Russia in November as high freight costs and premiums for Russia’s crude undermine the attractiveness of Moscow’s oil compared to Middle Eastern offers.
BPCL will buy lower volumes of Russian crude in November as the Middle East grades are more commercially attractive for the company now, BPCL’s head of finance, Vetsa Ramakrishna Gupta, said on Monday, discussing the refiner’s quarterly earnings with analysts.
Russian crude oil accounted for 37% of BPCL’s crude supplies in the quarter July to September, the executive said.
But the purchases of Russian cargoes for November will be “significantly reduced” due to the higher shipping costs, according to Gupta.
Yet, purchases of Russian crude oil may rise toward the end of the year.
The premium of Russian crude has tumbled to $1-$2 per barrel over regional benchmarks for December cargoes, down from as high as $13 per barrel for this month’s cargoes, the Indian refiner’s executive noted.
BPCL’s crude sourcing decision is generally in line with the recent trend for lower imports of Russian crude oil in India, due to the higher costs compared to Middle Eastern cargoes, whose availability has increased with the rise of flows through the Strait of Hormuz.
India saw its crude oil imports from the Middle East rebound in September to pre-war levels amid higher volumes exiting, while competition from China for Russian oil resulted in declining imports from Russia.
India’s crude oil imports from the Middle East jumped to 2.8 million barrels per day (bpd) in September, up by 32% compared to August and the highest level since February, vessel-tracking data compiled by Reuters showed last week.
Russia remained the single largest crude oil supplier to India in September, but the imports of Russian oil fell by 14% from August to 1.8 million bpd last month. The share of Russian oil in India’s oil imports dropped to 33.5% from 46.6% in August. Deprived of Iranian oil, China has turned to Russian crude, competing directly with India for Russian oil supply and driving prices higher.
Going forward, Indian refiners are likely to continue preferring higher volumes of Middle Eastern oil (when available), due to the pricing and the shorter voyages from the Gulf of Oman to India, a source with an Indian refinery told Reuters.
By Charles Kennedy for Oilprice.com
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