India may skip buying spot gas oil on ample supplies, low demand

Indian state-owned refiners may skip importing gas oil from the spot market for at least one month due to ample supplies and as reduced industrial output pares demand, industry sources said on Tuesday.

Refineries in Asia's third-largest economy are returning from maintenance shutdowns and output is expected to increase with two new plants coming online. This comes as demand slips, with industrial output slumping to 3.3 percent in July, its weakest annual pace in nearly two years.
"The Indian economy hasn't been going as planned, so demand has not increased a lot," said a middle distillates trader based in India. "The Indian refiners are currently able to match any additional requirements."
Bharat Oman Refinery Ltd's 120,000 barrels per day Bina facility in central India started earlier this year and Hindustan Mittal Energy's 180,000 bpd Bathinda plant in the northern Punjab state began operations in August.
Fuel demand in India typically falls during the monsoon as rains curb transportation and fuel use by the agriculture sector, and consumption usually picks up in the fourth quarter.
India last purchased spot gas oil barrels in June when Bharat Petroleum bought 40,000 tonnes from PetroChina to be delivered into Kochi. Hindustan Petroleum imported 32,000 tonnes from Trafigura while Indian Oil Corp imported about 350,000 tonnes, both in April.
HIGH INVENTORIES
BPCL does not plan to buy gas oil from the spot market at least until early November although it expects demand to increase soon after the monsoon, a source said.
Inventory levels, currently enough for about 21 days according to trader estimates, are considered high with the occasional cargoes coming in from Bina, which is still ramping up output to reach full capacity, the source added.
IOC may not import gas oil for least six months, with its refineries expected to run at full rates, another source said.
"There are no major shutdowns planned for this period and private refineries - Essar and Reliance - are expected to run at full rates, so it will be much cheaper for state-owned companies to source from the domestic market than to import," he said.
Essar Oil's 280,000 bpd Vadinar refinery in western Gujarat state shut for 35 days from Sept. 18 is also expected to be up in mid-October.
"With the added supplies coming on stream, unless there's a sudden spurt in demand, I don't think refiners are going to import soon," said a middle distillates trader.
Source: Reuters