India to look overseas to meet rising gasoline demand amid low production

Singapore — Indian state-owned companies may begin to set their sights overseas for gasoline cargoes, in an attempt to plug domestic supply gaps as demand for the motor fuel soars amid lagging refinery production, industry sources told S&P Global Platts.

India began the third and fourth phases of lifting lockdown measures in August and September, respectively, with metro services resuming Sept. 7 and workplaces in some states allowed to run at full capacity.

India's gasoline consumption strengthened in August, rising 5.34% month on month to a five-month high of 2.381 million mt, data from the Petroleum Planning and Analysis Cell showed, and major fuel suppliers and distributors were quick to react to the uptrend in motor fuel consumption.

State-owned refiners Indian Oil Corp. and Bharat Petroleum Corp. Ltd have emerged in the spot market after months-long absences, seeking parcels of gasoline for deliveries across the first half of October. IOC was last known to have sought spot cargoes in June and BPCL in April.

BPCL, the country's second-largest refiner, was heard to have bought 20,000 mt of 91.5 RON gasoline for delivery over Oct. 7-11 to Kandla at a premium of around $3.40-$3.50/b to the average of MOPS 92 RON gasoline and Argus Singapore 92 RON gasoline assessments, market sources said.

IOC, India's largest refiner with nine refineries, was reported to have sought 30,000 mt of 92 RON gasoline for Oct. 10-11 delivery to Chennai and Kochi, according to market sources and tender documents seen by Platts. IOC has since canceled this tender, but the reason for the cancellation could not be immediately confirmed.

IOC Chairman S.M. Vaidya told reporters after the company's annual general meeting Sept. 21 that India's gasoline demand over H1 September had already grown 9% compared to the same period in August and was 1% higher than a year ago.

Vaidya also said he expects India's fuel demand to recover to pre-coronavirus pandemic levels by the year's end due to a robust recovery in diesel and gasoline sales, Platts previously reported.

Lagging fuel output

But while gasoline demand has improved, Indian state-owned refiners have found the refining landscape challenging, with demand for middle distillates still poor and refining margins at depressed levels. In August, average capacity utilization for all categories of refineries in India declined to its lowest in three months at 76%, down from 83% in the previous month, PPAC data showed.

"Our refineries are not as complex as the large private refiners such as Reliance," one source with an Indian refinery told Platts. "Only gasoline is improving at a fast pace. The other products are not."

Reflecting this divergence, the FOB Singapore gasoil cargo crack against front-month cash Dubai was assessed at $3.40/b at the Asian close on Oct. 2, still hovering near a historical low as Asia's demand recovery remained clouded by a regional resurgence of COVID-19 infections.

The spread tumbled to $1.63/b on Sept. 24, marking the lowest crack since the benchmark FOB Singapore gasoil assessment moved from 500 ppm to 10 ppm sulfur gasoil on Jan. 2, 2018, Platts data showed.

On the jet fuel/kerosene front, the FOB Singapore jet fuel/kerosene physical crack against front-month cash Dubai fell deeper into negative territory as well, having averaged minus $2.18/b in September, from minus 70 cents/b in August, Platts data showed.