The brutal Covid-19 wave that spreads throughout India to record the seriousness of the 2020 outbreak has overwhelmed. On the surface, the short-term prospects for oil refiners are bleak, but a closer look shows significant differences from the last one this year. While some bizarre calls this month has emerged after the fuel consumption has plunged in April, India’s oil refineries and fuel marketers have improved this year, despite the virus that has split into one of the most popular countries in the world.
A national lockdown at the beginning of the past year to reduce the spread of the initial wave has paralyzed the economy, pushing down the oil demand in more than 10 years, and saddling refineries with fuel glutes. This has enabled some mobility and economic activity to prevent deep and expensive cuts to crude processing by refineries.
Delhi has further extended its lock down and tightened restrictions. Maruti Suzuki India Ltd, India’s biggest carmaker would expand its factory shutdowns for another week because of an outbreak. After lock-down decimation of fuel demand, refineries were forced to slash crude processing by 2020. The volume of crude oil and storage fuels quickly increased and companies fought to house surplus supplies, including inland depots, port tanks, and sea ships, with every option available.
“Some of these have had to cut rates during the current wave, such as Mangalore Refinery and Petrochemicals Ltd, but this time there will have abundant stockpilers after inventory has been cut off. The exports of fuel in March rose to 11 months, with the global demand recovery gaining momentum during the first quarter, helping to drain bloated household stocks. A potential outlet for excess supplies was the reopening of parts of Europe, the key export market in Indian fuels. The first week of May with the same levels, and expected to deliver products including petrol and diesel at 1,000,000 barrels daily, Vortexa forecasts that if domestic demand falls further, the growth might be impending”, said Sushil Chandra Mishra, Managing Director of Oil India limited.
Road sales in the United Kingdom which held for seven days till May 1, have reached their highest level since the pandemic began. Cars are returning worldwide with people travelling with trains and coaches fueling a rise in demand for oil and metals in nations that could afford ownership costs.
“The cyber-attack took off the nation’s biggest pipeline operator, oil (petrol) prices rose to a three-year high in day trading, motor fuel was strongly rebounding even before the Colonial Pipeline Co., system was forced offline. India has been forced to switch from others outside the country by the terrible situation with Saudi Arabia cutting its official crude price to Asian customers for June as a result of the outbreak. Yet wider markets for oil have barely blinked”, added Sushil Chandra Mishra.
Brent crude global benchmark covers USD 70 per barrel while Covid 19 has experienced a sharp increase in commodity markets for Goldman Sachs Group Inc. However, the big wildcard remains a complete lockdown. Since 11 May, the rapidly spreading virus has infected almost 23 million people and might spur more heated requests for a total shutdown that would shake dramatically, the energy consumption outlook and weigh heavily on the emerging recovery.
