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India's rekindled appetite for West African crude


State-run refiners on buying spree with several tenders issued

Almost 20 mil barrels of Nigerian crude bought for Dec/Jan loading

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London — India's buying of West African crude has risen markedly of late as the country's refineries step up their runs with domestic demand for oil products starting to rise back toward pre-COVID-19 levels.

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Resurgent demand in India for gasoil, gasoline, LPG and naphtha bodes well for West African crudes, most of which are light sweet and medium sweet, and state-run refiners such as Hindustan Petroleum Corp. and Indian Oil Corp. have been on a buying spree, issuing a number of tenders for December- and January-loading crude.

The two refiners have already bought almost 20 million barrels of Nigeria crude for the next two months. IOC also has two outstanding tenders, both of which close Nov. 19, for cargoes arriving late December and through January.

Indian refiners also have term contracts with West African crude producers including Angola, Equatorial Guinea and Gabon. Representatives at IOC and HPCL were not available for comment.

West African crude exports to India -- the world's third-biggest energy consumer -- averaged around 430,000 b/d in the first 10 months of 2020 compared with 600,000 b/d in 2019, according to commodity data company Kpler.

India is the largest buyer of Nigerian oil and its renewed buying has supported values at a time when Nigeria's core European market has seen supply coming back online from Libya and a fall in demand as a result of fresh COVID-19 lockdowns.

"Inevitably with all these tenders, offer levels will be propped up and buyers will have to pay up," a trader said, pointing to cheap freight and the contango on flat prices as additional supporting factors.

Returning demand

IOC chairman Shrikant Madhav Vaidya said late October the company's refineries would be running at full capacity in the next couple of months. IOC increased runs at its refineries to 90% in October and November, Vaidya said.

India has eased restrictions on business recently. GDP declined sharply in the third quarter when COVID-19 infections peaked. India observed a national lockdown from end-March for almost three months, which had a severe impact on oil demand.

It is only since October that demand recovered, helped by Diwali festivities.

S&P Global Platts Analytics expects Indian oil demand to fall 460,000 b/d year on year to 4.58 million b/d in 2020, then rise 430,000 b/d in 2021. The last time India witnessed negative growth in oil demand was in 2001, when consumption fell marginally from 2000 levels.

Traditional buyer

India has always been a keen buyer of West African crude, as it is low in sulfur and good for processing middle distillates and light end products like gasoline, LPG and naphtha.

It is primarily the state-run refiners which like this crude, as the bulk of their plants are still simple refineries.

Privately-run refineries in Jamnagar and Vadinar, on India's west coast, are complex plants and prefer heavy and medium sour crudes.

India is also a regular buyer of crude from Cameroon and Republic of Congo in West Africa.