Refiners cut output to prevent stock build up in a market with subdued demand

New Delhi: With India’s fuel demand slipping again after reimposition of lockdowns across parts of the country to combat a surge in COVID-19 cases, Indian oil refiners have started doing the balancing act to prevent buildup of excess stock of products with squeezing outlets to liquidate them.

Industry sources said, country’s largest public sector refiner IndianOil has reduced cut output at its refineries to less than 90 per cent levels this month after clocking over 95 per cent refinery throughput last month to prevent build up of stocks as storage facilities are getting full with restricted dale in the market.

Government officials contend that the situation this year would not worsen to the levels it went last year as inter state movement of vehicles is still on and industrial activity largely is going on unhindered. Last year a few refineries had to reduce their output to as low as 65 per cent to prevent build up stock in absence of viable sales options in the market.

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An official of a public sector oil refiner said that though fuel consumption in May is expected to be lower by about 5 per cent over April numbers which itself was about 10 per cent lower than March numbers, they would get away with limited cut on refinery output this month and maybe in June to balance operations.

The reduction in refinery throughput also had an impact on crude imports that fell in April and is likely to fall again in May. Sources said, HPCL has reduced crude imports to 1 million barrels in May and May further deepen these cuts to 2 million barrels in June.

“This this year are not as bad as 2020 for oil refiners. With various global economies opening up post Corona wave, fresh demand has been created for Indian refined petroleum products. This has eased stockpiles and these is ample space to store products now. This will put lesser pressure on refiners to cut production in absence of demand and stocking facilities,” said an official of PSU refiner.

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