India may cut oil imports to mitigate pain from high oil prices, dip in rupee

New Delhi: India, the world's third-biggest oil importer, is considering cutting oil purchases to soften the blow from high crude oil prices and declining rupee, Indian Oil Corp (IOC) Chairman Sanjiv Singh said Monday.

State refiners are looking at optimising crude oil inventory levels without in any way affecting fuel supplies in the domestic market, he told PTI.

Refiners maintain 7-8 days of inventory in tankages besides carrying stocks in pipelines as well as ships in transit. They are looking at reducing these so that monthly imports of crude oil can be reduced, he said.

India is the third largest importer of crude oil and rising international crude oil prices are inflating domestic transport fuel rates in a strong demand environment. Brent, the benchmark for half of world's oil, climbed to USD 80 per barrel from USD 71 in the last five weeks, and the Indian rupee lost ground against the dollar by 5-6 percent during the same period, resulting in expensive crude imports.

India is 81 percent dependent on imports to meet its oil needs.

"We had a meeting last to last Saturday (September 15) to deliberate on a host of issues facing the industry and in that meeting, one of the options that was considered was to reduce imports by cutting down on inventory levels," Singh said.

An important factor guiding the decision was also Asian Premium climbing to as high as USD 3-5 per barrel in last 3-4 months, he said.

Asian Premium is extra charge being collected by oil-cartel OPEC countries from Asian countries when selling oil in comparison to western countries.

"Reducing inventory levels and imports are being considered as temporary measures without impacting fuel supply in the domestic market," he said. "This decision would in no way be allowed to impact supplies of petroleum products in the domestic market. Our commitment to meet domestic supplies remains supreme."

Singh said the high oil prices will in long term impact demand and so reducing imports makes sense.

India imported 18.6 million tonne (MT) of crude oil in August for USD 9.8 billion. It had imported 18.1 MT of crude in the same period of 2017 for USD 6.4 billion.

During April-August, it has spent USD 48.9 billion on import of 94.9 MT of crude compared to USD 31 billion on the import of 89.1 MT in the same period last year.

Singh, however, did not say when the move will kick in saying these are ongoing discussions.

"One thing is very clear that we do not want petroleum product supplies in the domestic market to be impacted in any way," he said.

Petrol Monday crossed the Rs 90-mark in Mumbai as rates across the country touched a new high. While petrol in Delhi costs Rs 82.72 per litre, it costs Rs 90.08 in Mumbai. Diesel is priced at Rs 74.02 in Delhi and Rs 78.58 in Mumbai.

Since mid-August, the petrol price has risen by Rs 5.58 a litre and diesel by Rs 5.3 - the most in any month since the daily price revision was introduced in mid-June last year.