MUMBAI: The rise in the Singapore gross refining margin (GRM) to a record high of $25.2 a barrel bodes well for Indian refiners who have stepped up purchases of discounted Russian oil by 160% in May from a month ago, a refinery official told TNIE.
“Certainly, imports of Russian crude have risen, especially among those refiners who haven’t entered into too many long term contracts,” he said. “Those with a relatively higher quantum of long-term contracts haven’t been able to gain the full advantage relative to those refiners who have fewer long-term contracts.”
Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to Bloomberg, which cited data from data and analytics provider Kpler. India, the world’s third-largest oil importer, imported 211.98 mn tonnes of crude in FY22 against 196.46 mn tonnes in the preceding fiscal year. Post the Ukraine invasion on February 24, Russia offered crude oil at a $35 a barrel discount compared with the pre-Ukraine war price level.
On oil price, the refiner said that Brent would remain in excess of $110 a barrel so long as the Russia-Ukraine war persisted and that one way to alleviate the threat of high oil price was to hedge against volatility. “The price will hover above $110 a barrel as long as there is no end in sight to the war,” he said, adding, “One way to mitigate the effects is through price hedging. Frankly, each refiner determines what kind of a hedge book it should have.
As long as prices remain volatile, it makes sense to hedge.” Hedging involves forward purchase of crude and sale of products like petrol and diesel forward. Along with the Singapore GRM hitting a record high Indian refiners' diesel crack spreads have hit multi-year highs. A spread is a difference between product price and crude rice. This rise in margin and in the diesel crack has put the spotlight on Indian refiners like Reliance, IOC, BPCL and HPCL and MRPL, sources have said.
India’s oil imports from Russia
Mumbai: India, the world’s third-largest oil importer, imported 211.98 mn tonnes of crude in FY22 against 196.46 mn tonnes in the preceding fiscal year. Post the Ukraine invasion on February 24, Russia offered crude oil at a $35 a barrel discount compared with the pre-Ukraine war price level. On oil price, the refiner said that Brent would remain in excess of $110 a barrel so long as the Russia-Ukraine war persisted