Page 33 - Plastics News March 2018

FeAtures

India’s state-run oil refiners see strong margins for 2018

Fuel demand growth accelerates for fuel products amid a record $93 billion spent on infrastructure and
stable crude oil prices

ndian refiners hope global prices will remain sub-$70 per prices, currently around $65 a barrel,
Ibarrel as world oil production rises while new refining and on the status of world inventories
capacity doesn’t keep the pace. The International Energy of refined products.Indian refiners hope
Agency said this month it expects oil production to slightly global prices will remain sub-$70 per
outpace demand this year, especially thanks to still rising barrel as world oil production rises while
output in the United States. With this State-run refiners new refining capacity doesn’t keep the
expect their profit margins to hold their strength this year pace. The International Energy Agency
as demand growth accelerates for fuel products amid a said this month it expects oil production
record $93 billion spent on infrastructure and stable crude to slightly outpace demand this year, especially thanks
oil prices, company executives and analysts said. to still rising output in the United States. M.K. Surana,
head of Hindustan Petroleum Corp. Ltd, said he expected
India’s sales of cars and especially motorbikes are forecast
to rise rapidly, even as the development of a Delhi-Mumbai international crude prices between $62 and $68 a barrel this
industrial corridor drives consumption of the country’s year, as long as there are no geopolitical crises or technical
primary fuel products, diesel and gasoline. disturbances like damage to the Forties pipeline.
Based on that expectation, India’s refiners should see
refining margins, also known as cracks, in the range of $7-
$8 per barrel for all three state-owned refiners. “Products
demand continues to rally on better industrial performance
and weather-related support ... Rising oil prices have done
little to dampen the growth so far,” said Sri Paravaikkarasu,
head of East of Suez Oil, at consultancy FGE. FGE expects
Singapore margins to hold around $6-$7 a barrels due to
upcoming refinery maintenance and summer demand. “The
margins for Indian refiners will be slightly better as India
prices its products on import parity basis,” she said. Asia’s
benchmark margins in the oil trading hub of Singapore
currently stand around $7.20 per barrel.

The infrastructure programme for fiscal 2018-19 calls for Better refining margins for the state-owned refiners - and
more than 80,000km in new highways to better connect improved profit from selling retail fuel - will pump more
rural areas with urban hubs. Roads and other construction cash into government coffers ahead of key elections this
require oil-based products such as tar and plastic piping, year and next for Prime Minister Narendra Modi, who needs
and fuel to move materials by truck and rail. “They (these money for his ambitious healthcare and infrastructure
projects) will have a cascading effect on fuel demand,” programmes. The cash inflow would come just ahead of
said R. Ramachandran, director of refineries at Bharat eight state elections this year and national elections in
Petroleum, adding that this would be reflected directly in 2019. Healthy profits will also help the state-owned refiners
strong refining margins.India’s annual fuel demand, made to continue spending on expansion plans. India aims to
up mainly of diesel and gasoline, is expected to grow 7.5% increase its refining capacity by 77% to about 8.8 million
in 2018, according to a report by BMI Research, a unit of barrels per day (bpd) by 2030, which will cost dozens of
Fitch. That compares with 5.4% last year, according to billions of dollars. State-run refiners Indian Oil Corp. Ltd,
government data. “Strong fundamentals and rising demand Hindustan Petroleum and Bharat Petroleum Corp. Ltd, that
in India indicate that refining margins will remain strong sell most of their output locally at prices linked to global
in the near term, for at least six months,” Ramachandran rates, largely reported strong profits and margins for the
said.Refining margins also rely heavily on global crude oil October-December quarter.
Courtesy: Reuters

33 March 2018 Plastics News