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Uptick in fuel demand spurs increases in India's refinery runs, crude purchases

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Uptick in fuel demand spurs increases in India's refinery runs, crude purchases

Highlights

Indian refiners seen making more spot crude oil purchases

Refinery run rates could reach pre-pandemic levels by Q1 2021

Singapore — Expected increases in refinery run rates, on the back of an uptick in domestic oil product demand toward the end of the year have spurred purchases of crude oil from Indian refiners in recent weeks, market sources said.

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Additional spot crude oil demand have begun to emerge from Indian refiners with some heard to have made more purchases for December arrival from previous months.

India's state-owned India Oil Corp was heard to have purchased 2 million barrels of West African crude oil grades for December-delivery in a tender this month, while Bharat Petroleum Corporation Limited was heard to have purchased at least 4 million barrels of various crude oil grades, market sources said.

HPCL-Mittal Energy Limited, or HMEL, was also heard to have purchased at least 1 million barrels of Oman crude and a similar volume of Qatar's Al-Shaheen crude, while Hindustan Petroleum Corporation Limited could have purchased a VLCC of West African crude oil, they added.

Reliance, meanwhile, was heard to have bought around 4 million barrels of Middle East crude for December-loading, sources said.

"We are definitely seeing some uptakes [from Indian refiners] for December-delivery barrels," said a crude oil trader.

Indian refiners are eyeing to raise their run rates in the October-December quarter as demand for diesel and gasoline is expected to rebound with the easing of movement restrictions and the upcoming festive season, sources said.

In September, the average run for all categories of refineries in India improved to 86% as compared to 76% in the previous month, latest survey from the oil ministry showed Oct. 26.

Market sources indicated that Indian refiners could increase their processing rate to 90% by November and 100% or more by December.

"We expect oil demand and refinery run to reach the pre-Covid 19 levels in the first quarter of 2021," an oil ministry official told S&P Global Platts on Oct. 26.

India, Asia's second-biggest oil consumer, introduced a nationwide coronvirus lockdown from March 25 for two and a half months, and began easing lockdown measures in June with most economic activities permitted with social distancing protocol.

"People have accepted that they have to live with COVID-19 ... and a new trend has started in India with demand shifting from jet to diesel and mostly gasoline," said a crude oil trader with an Indian refinery.

India's domestic consumption of gasoline reached a seven-month high of 2.45 million mt in September, inching up for the second consecutive month by 2.91%, latest data from the Petroleum Planning and Analysis Cell showed. It was last higher in February, at 2.511 million mt.

September also marked the first time since February that Indian gasoline consumption was above the year-ago level of 2.37 million mt -- a 3.19% rise, the data showed.

Meanwhile, India's gasoil consumption rose 13.2% month on month to 5.49 million mt in September, latest provisional data from PPAC showed.

Industry sources said that the easing coronavirus-related restrictions have helped to spur demand for the middle distillate, which led gasoil consumption to bounce back to above the 5 million-mt level, after slumping to a four-month low in the preceding month.

"If the [demand] trend continues [for these oil products], it will deplete inventory and refiners will [therefore] have to increase run rates," the crude oil trader said.