At least three Indian refiners have curbed oil imports from Middle East producers, including Saudi Arabia, for May because of storage constraints as local fuel demand slumped following the coronavirus outbreak, company officials said.
This is the second consecutive month that Indian refiners have cut their long-term crude imports as space to store excess oil is running out because companies are cutting their processing as stay-home measures to curb the spread of the virus have slashed fuel demand.
One of the refinery officials said his company has cut May purchases from Saudi Arabia by about 80%, while an official at a second company said it will take 66% less oil from Saudi Arabia in May compared with their average monthly purchases from the country.
For crude supplied by Abu Dhabi National Oil Co, the first refinery official said his company will take just one cargo in May instead of an average of two each month, while the second refinery official plans to receive some deferred cargoes from April and has nominated only one cargo for May.
ADNOC has already reduced crude supplies for May after OPEC+ decided to cut output.
Both officials said their companies will take about 75% less crude from Kuwait Petroleum Corp (KPC) in May compared to their average monthly purchases.
"There is no demand, so purchases are low," said the source at the first refiner.
A source at the second Indian refiner said that Saudi Arabia is willing to accommodate demand for extra oil although his company doesn't want more for May.
Iraq is also offering one less cargo than the second Indian refiner, which had a monthly requirement of three to four cargoes, a source at the company said.
An official from a third Indian refinery said his company would be taking less oil from the Middle East in May than their typical monthly average as demand has dwindled, without disclosing the volume.
"There is no demand...our tanks are full and crude processing has declined due to low demand," the source said.
State-run refiners have sold excess cargoes to the federal government for filling strategic reserves.
Many Indian refiners have issued prompt tenders to export fuel and have almost halved refinery runs after local demand slumped. India's fuel demand fell by about 50% in the first half of April.
The Indian refinery sources declined to be named because of the sensitivity of the matter. Saudi Aramco and ADNOC declined to comment and KPC and Iraq's oil marketing company SOMO did not respond to Reuters' request seeking comments.
A source from one of the Middle East producers confirmed the lower demand for crude in India.
"Some Indian refiners have cancelled their shipments for April and May. They will take these cargoes in the later part of the year to meet their annual commitment," said the source.
"Some losses we will bear and some (losses) they (the buyers) have to share," he said.
Revenues of key oil producers have crashed after a plunge in oil prices as demand has shrunk due to lockdowns and economic slowdowns during the coronavirus pandemic. The Organization of the Petroleum Exporting Countries and its allies, including Russia, announced sweeping cuts in production, amounting to almost 10% of global supplies. Demand has dropped as much as 30%.
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