India’s Oil Imports Drops To 9-month Low As Crude Oil Sets To Close Below $75

What you should know

• The June 2021 decline in crude oil imports from the world’s third-largest oil importer did not come as a surprise, considering that April and May were the months in which refiners likely nominated oil cargoes for June. This period coincides with when the country saw the peak of its COVID crisis, with grim records in daily new cases, hospitalizations, and deaths.  
• The country’s government decided against a nationwide lockdown, fearing economic collapse but the most populous cities and regions were placed under regional lockdowns and various forms of curfew, which dragged down demand for road transportation fuels gasoline and diesel.  
• Indian fuel demand plunged by 9.4% in April compared to March due to the COVID crisis. Fuel demand in India continued to slump in May, with gasoline sales down to a one-year low and diesel consumption dropping to the lowest in seven months in the first two weeks of May.   
• Due to the increase in COVID-19 cases, refiners reduced run rates and nominated less crude for arrival in June as inventories grew. For example, India’s top refiner, Indian Oil Corporation (IOC), had reduced its capacity utilization to 84% in the middle of May, compared to 100% last November when demand was rebounding.    
• Other factors affecting oil prices include Saudi Arabia and the United Arab Emirates moving closer to a compromise that would allow OPEC+ to go ahead with increasing oil production in response to rising oil prices. The two have reached an agreement that would see the UAE’s oil production baseline increased from 3.17 million bpd to 3.65 million bpd which means that more supply of oil will be coming to the market.  

 

Bottomline

With the addition of more OPEC+ barrels to global supply and India’s oil imports dropping by 7% in June as a result of rising COVID-19 cases, the price of oil is set to be bearish for the short term.