Bharat Petroleum Corp (BPCL), India’s third-largest refiner, forecasts that Middle Eastern oil producers will reduce their official selling prices (OSPs) for crude in the coming months. This expectation arises from the shrinking margins on fuel sales, according to the company’s head of finance, Vetsa Ramakrishna Gupta.
Refiners worldwide are grappling with lower fuel cracks—the gap between crude oil costs and the price of refined products. In Asia, complex refining margins have halved, dropping to $4.10 per barrel as of July 19 from approximately $8.20 per barrel in February.
“Compared to April-May, the OSPs are moderate and these OSPs will be further moderated because cracks are on the lower side,” Gupta stated during an analysts’ call. “I don’t think OSP premiums will be on the higher side when cracks are on the lower side.”
BPCL reported a 71% decline in net profit for the three months ending June 30, down to 30.15 billion Indian rupees ($360 million), partly due to reduced margins.
Saudi Aramco Cuts and Russian Imports
Earlier this month, Saudi Aramco reduced crude prices for Asia for the second consecutive month. The price for its flagship Arab Light crude for August loadings reached its lowest point since March.
Indian refiners source most of their crude from Middle Eastern suppliers. However, they have also increased imports of discounted Russian crude following Western sanctions against Moscow due to its invasion of Ukraine. Russian crude discounts have remained at $3.50-$4 per barrel for delivery at Indian ports. Gupta noted that Russian oil now constitutes about 40% of BPCL’s overall crude processing.
BPCL processes approximately 700,000 barrels of crude daily across its three refineries. It sells around 52.5 million metric tons of refined fuel annually through its nationwide outlets.
BPCL’s strategy to secure crude from multiple sources and manage fluctuating prices underscores its adaptability in a volatile market. The company’s proactive measures to import discounted Russian crude and negotiate lower OSPs reflect a broader trend among refiners to optimize supply chains and maintain profitability despite industry challenges.
Source: Reuters
