NEW DELHI: India’s oil import bill is expected to shrink sharper than previously estimated 6% as the increasing spread of Covid-19 across the globe has depressed crude oil prices to below $50 a barrel, industry insiders said.
The oil ministry’s petroleum planning and analysis cell had estimated that crude oil import bill would decline 6% to $105 billion, or Rs. 7,43,900 crore, in 2019-20 from $112 billion, or Rs. 7,83,200 crore in the previous year. This is based on actual average price of $64/barrel for April-December and an assumed price of $66/barrel for January-March on an average exchange rate of Rs. 71 to a dollar.
However, since the beginning of 2020, crude oil prices have contracted by a quarter from $66 a barrel to under $50 a barrel on Friday.
“The annual numbers would now significantly change as import bills for February and March get added,” said an industry executive who requested not to be named.
If crude price falls by one dollar per barrel, India’s import bill shrinks by Rs. 2,936 crore. If exchange rate shifts by a rupee to a dollar, import bill changes by Rs. 2,729 crore.
The country’s oil import bill had halved in 2015-16 to $64 billion as crude oil collapsed but has risen every year since as prices recovered until this year when they are expected to fall.
Analysts don’t expect crude oil prices to rise in a hurry and sustained lower prices would mean gains for India that imports 85% of its oil needs.
Lower prices also mean lower fuel cost for refiners, which would boost profitability. But a sharp decline results in inventory loss that sharply cuts profit for refiners.
Lower volume of crude processing by refiners this year would also contribute towards lower import bill this year.
The import volume is estimated to contract to 225 million metric tonnes in 2019-20 from 226.5 million metric tonnes in 2018-19. During April-Jan this fiscal, refineries processed 212.1 million metric tonnes compared to 214.6 mmt in the same period in 2018-19 as many refineries took shutdowns to ready themselves to produce higheremission norms fuels.
India has also begun benefitting from lower liquefied natural gas (LNG) prices that have fallen below $3 per mmBtu in the spot market as Chinese buyers turn away cargoes. India depends on LNG for half of its gas requirement.
Analysts expect spread of Covid-19 to hurt global oil and gas demand. Global oil demand is estimated to grow 0.86 million barrels per day in 2020, lowered by a massive 0.47 million barrels per day from January estimate, S&P Global Platta Analytics said in a report. Reductions to air and ground transportation in China have badly hit demand for petrol, diesel and jet fuel. “The rolling geographic nature of the virus’s spread means its duration could be extended into the second quarter,” the report said.
Source: economictimes.indiatimes.com