BPCL expects Russian crude to play ‘significant role’ in current year; procured 39% oil from Moscow in FY24

BPCL said it would be able to maintain marketing margins as long as crude oil in the range of $80-$85 per barrel.

Bharat Petroleum Corporation Limited (BPCL) procured around 40 percent of its total crude oil imports from Russia in financial year 2023-24, the company said in an analysts call on May 10.

The state-owned oil marketing company said it expects Russian crude oil to play a significant role in the current financial year as well.

“If you see, for FY23-24, our imported crude is around 36 MMT. We have procured around 39 percent of that from Russia. It is containing (grades) like Urals, S4, and CPC . We are expecting similar grades from Russia this year also. For 2024-25 also, Russian crude can play a significant role in the total throughput,” said BPCL.

The management added that it expects discounts on Russian crude in the range of $3-$4 per barrel or $3-$6 per barrel, compared to $8- $10 per barrel last year, amidst moderation in supply of Russian oil.

“Last year, there was an over-supply of Russian crude, but now it is not in an over-supply zone. The demand-supply dynamics for Russian crude is moderate. So, we are expecting moderate discounts, not very aggressive discount for Russian crude,” said BPCL. The management also pointed out that the company buys Russian crude on a spot basis rather than on a term contract.

Regarding marketing margins, BPCL said that it would be able to maintain marketing margins as long as crude oil is in the range of $80-$85 per barrel.

After Iran’s attack on Israel in mid-April, crude oil prices had shot up and touched $90 per barrel. The prices remained elevated for a while on account of geopolitical tensions but have now cooled down and are trading around $82 per barrel.

“As long as crude prices are hovering in the $80-$85 range, we are comfortable at this pricing. The margins may be squeezed for a short period of time. But as long as crude is hovering around $80-$85, we can generate  marketing margins,” said BPCL.

BPCL, on May 9, reported a slump of 30 percent in its consolidated net profit in the fourth quarter of FY24, amidst weak refining margin and high crude oil prices in the period.

Crude outlook

The oil refiner expects crude oil prices to be in the range of $84- $87 per barrel due to the balance between global supply and demand. BPCL, however, posed escalating geopolitical tensions, supply cuts and trade route disruptions as downside risk on oil demand.

“Our expectation is that global supply and demand will be relatively balanced, and the prices will be range-bound between $83 and $87 per barrel. The factors that could impact prices is largely related to unplanned production disruptions, and risks of escalating tensions in the Middle East,” the company said.

“Global economy is projected to marginally strengthen this year, supported by economic resilience in key markets like the US and China. However, escalating tensions and trade route disruptions present a downside risk on the demand side of growth,” it added.

In the domestic market, BPCL foresees strong demand of petrol and diesel in the near term. The company said growth in demand of petrol is expected to be around 5 percent, whereas diesel demand would be about 1.5 percent to 2 percent.

BPCL added India’s expanding economy would inevitably lead to a surge in energy demand. It expects oil demand to grow to about 2,200 million tonnes of oil equivalent by 2047 from current 618 million tonnes of oil.

Strong Russian crude supply despite hurdles

Despite fresh sanctions imposed on Moscow by the US, Russia’s supply of crude oil to India had remained robust. According to information from energy tracker Vortexa, India’s imports of crude oil from Russia increased by 18 percent in April from last month.

Out of the total crude oil imports of 4.5 million barrels per day, India imported 1.7 million bpd of oil from Russia in April. The rise in oil supply from the Eurasian country comes despite reports of narrowing discounts on Russian oil and tighter US sanctions on the country.

Moreover, India was the top buyer of Russian crude oil in April. Moscow supplied more oil to India than China in April, a trend reversal from last month.