Indian refineries run hard despite demand downturn

Most of India's state-controlled refineries have operated at maximum capacity so far this month, undeterred by a drop in domestic transport fuel demand.

BPCL has been operating its 310,000 b/d Kochi, 240,000 b/d Mumbai and 156,000 b/d Bina refineries at 100pc of nameplate capacity and sometimes higher, while MRPL has also been running its 300,000 b/d refinery in Mangalore at maximum levels, market participants close to the refiners told Argus. Likewise, HPCL's Mumbai refinery, where capacity was expanded to 190,000 b/d last year, and its 166,000 b/d Visakhapatnam (Vizag) refinery have been at 100pc nameplate capacity or above.

IOC bucked the trend. Its refinery utilisation rate has been around 93-97pc, pushed down by reduced runs at the 161,000 b/d Haldia refinery following a fire last month. Haldia has been operating at around 50pc, market participants said.

India's state-run refiners have been running their plants hard in the past few months on the expectation that domestic fuel demand would pick up. Given that consumption has been lacklustre this month but regional product margins are robust, it is likely they will opt to export or replenish their inventories, market participants said. Indeed, IOC offered to sell a spot gasoline cargo for February loading this week.

Middle distillate margins in Asia-Pacific have firmed in recent weeks. Asian gasoil margins — Argus-assessed Singapore 10ppm sulphur gasoil swaps against Dubai crude values — strengthened from just $12.88/bl on 3 January to around $15-16/bl by 20 January on the back of limited supplies from China and the Mideast Gulf.

Asian jet margins — Singapore jet fuel swaps to Dubai crude values — started off the year at $10.38/bl on 3 January but landed at around $12/bl by 20 January. The rise was supported by kerosine demand for heating and the easing of travel restrictions in Thailand and Vietnam.

Gasoline margins have fared less well, with rising Covid-19 cases in key gasoline-consuming countries in the region weighing on driving activity. Asian gasoline margins — Argus' 92R gasoline spot assessments against Ice Brent — were assessed at $12.14/bl on 3 January but fell steadily to around $10.5/bl in recent days.

Demand downturn

Transport fuel consumption in India declined by about 14pc on the month in the first half of January as concerns over the Omicron variant constrained mobility. Driving activity in the country has been steadily decreasing this month — it is currently 78pc above a 13 January 2020 baseline, compared with 132pc above the baseline in December, according to data from US technology firm Apple.

Meanwhile, footfall at domestic airports has averaged 446,000/day so far this month versus a 717,000/day average in December, according to Argus estimates based on daily traffic data published by the country's civil aviation ministry. Aircraft movements in India have averaged 4,500/day so far this month, compared with 5,600/day in December.

By Sathya Narayanan, Aldric Chew and Cara Wong