19:37 GMT11 August 2020
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    New Delhi (Sputnik): Oil markets have witnessed historic lows beginning Monday, as future contracts for West Texas Intermediate (WTI) crude fell to record negative levels (-$37/bbl), while Brent crude slipped to a 20-year low, as demand for petrochemical-based energy products - from gasoline to jet fuel - plummeted due to the coronavirus pandemic.

    As the prices of WTI crude oil crash at historic lows this week, there is wider debate whether India, which buys Brent crude oil, will benefit from the plunging numbers.

    “Some refineries are designed primarily for Middle East crude but most of the newer refineries can take any crude, so India can buy much more from US,” former secretary of the Indian petroleum ministry, SC Tripathi, replied to Sputnik, as many suggest that Indian refineries can be used to process crude oil from Middle-East countries.

    India--whose 83-percent domestic requirement is met through imports--primarily purchases oil from nations including Saudi Arabia, Iraq, and Kuwait. However, in recent years, the Indian government has diversified oil purchases as a means of forcing lower prices from OPEC producers.

    India, being the world’s third largest buyer of crude oil, has been spending around $85 billion on oil imports annually, and Delhi has estimated that a drop of $10 per barrel in crude prices could save the nation some $15 billion.

    “India does buy crude from the US but one has to look at overall economics. India can buy more crude from the US but shipping rates have skyrocketed, which means crude may be cheaper but shipping costs are very high,” Narendra Taneja, a leading energy expert in the country, told Sputnik.

    Earlier, it was expected that shipping costs for crude oil from US to Asia would fall after May but, according to a report in the Wall Street Journal, VLCC (very large crude carriers) ships that can transport up to 2 million barrels of oil, are charging $72,500 a day for a year-long contract, compared to $30,500 a day a year ago.

    Apart from extraordinarily high shipping costs, Tripathi pointed to restrictions in the export of US crude oil.

    “India is already purchasing from the US but in small quantities as transport was taking longer and becoming costlier. Also, the US was not allowing free export and every consignment required an export license from the US,” Tripathi said.

    Global petrochemical energy giants, including BP and Total, are scaling up crude oil reserves, taking advantage of the low prices. However, given the storage capacity for India's strategic oil reserve, experts suggest that country can not save much from lower prices.

    “India has limited capacity for the storage of oil so that option is there but limited in terms of the size and capacity. Absolutely. India should expand the storage capacity,” Narendra Taneja, one of leading energy expert of country, said.

    India has so far built strategic storage capacity of only 5.6 million metric tons. “India needs capacity of 30 to 45 million metric tons,” Tripathi noted.

    Nevertheless, Delhi has begun building a 6.5 MMT strategic petroleum reserve at two locations, Chandikhol in the eastern state of Odisha, and Padur in the southern state of Karnataka.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.

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    Indian Bourses Tank on US Crude Oil Shock
    Tags:
    Russia, OPEC, Crude oil, WTI, America, India
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