India’s crude oil imports in the first two months of the current fiscal rose nearly 6% to 43.1 million tonnes from 40.6 million tonnes in the same period last year, as demand for petroleum products continues to rise amid stagnant domestic production, according to the latest data from the Petroleum Planning and Analysis Cell.
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In May, the country imported 21.8 million tonnes of crude oil, up 5.7% from May 2022. The country’s crude oil import bill also rose 21.4% to $26.1 billion in the April-May period compared to the year-ago period.
Apart from rising volumes, the rise in the import bill can be attributed to discounts offered by Russia, which has become the top supplier of crude oil to Indian refiners after the outbreak of the conflict between Russia and Ukraine.
According to the industry, the discounts offered by Russia on its cargoes have come down to $3-4 per barrel from $8-10 per barrel earlier.
According to ICRA, India’s net crude oil import bill could reach $101-104 billion in FY25 from $96.1 billion in FY24, provided discounts on purchase of Russian crude oil remain at the current low level amid rising dependence on imports.
Despite the government’s efforts to increase production and reduce dependence on imports, output has remained stagnant for the last 10 years. The country’s upstream companies produced a combined 4.9 million tonnes of crude oil in April and May, unchanged from last year, while consumption of petroleum products rose 2.4% to 40.3 million tonnes.
In his second term as oil minister, Hardeep Singh Puri has said the government’s focus will remain on boosting domestic production of oil and gas. He said Oil and Natural Gas Corporation expects to soon reach the highest ever production of 45,000 barrels per day of crude oil from its KG 98/2 block, which will aid domestic production. Puri said the ministry will also hold the ninth and tenth bidding rounds under the Open Acreage Licensing Programme in the coming few weeks. The growth in consumption of petroleum products was led by a 7.7% increase in demand for motor spirit, 1.6% in high speed diesel and 12% in aviation turbine fuel. As per the report, consumption of liquefied petroleum gas grew by 5.5% during the period. Indian oil refineries processed 5.36 million tonnes of crude oil in the first two months of FY25 as against 5.31 million tonnes in April-May 2023. Of the total crude oil processed, Bharat Petroleum Corporation Limited processed 6.9 million tonnes as against 6.7 million tonnes last year. Hindustan Petroleum Corporation Ltd processed 5.8 million tonnes as against 5.7 million tonnes in the previous year. However, Indian Oil Corporation Ltd processed 12.2 million tonnes of crude oil in the April-May period as against 12.5 million tonnes in the same period a year ago.
The price of the Indian basket of crude oil averaged $83.56 per barrel during May 2024 as against $89.46 per barrel during April 2024 and $74.98 per barrel during May 2023.
Analysts expect crude oil prices to ease over the medium term and reach the low of $60 per barrel by early 2025. Prices are expected to decline over the medium term due to a potential surplus in the global market until 2025 despite the decision by the Organization of Petroleum Exporting Countries to continue voluntary cuts of 2.2 million barrels per day (bpd) until September 2024.
