India’s BPCL Scrambles for Crude as Supply Risks Escalate
India’s BPCL is adjusting its crude sourcing strategy and increasing spot-market purchases as shifting global supply conditions force refiners to rethink procurement plans.
(Reuters) — India's state-run refiner Bharat Petroleum Corp. is recalibrating its crude import strategy almost daily and ramping up spot purchases after the U.S.-Israeli conflict with Iran disrupted Middle East supplies, Chairman Sanjay Khanna said on May 19.
India, the world's third-largest oil importer and consumer, has been hit by rising crude prices and supply disruptions following the closure of the Strait of Hormuz. The South Asian nation has raised the retail prices of petrol and diesel twice in a week.
BPCL had planned to source about 55% of its crude requirement for 2026/27 through annual contracts, mainly from Middle Eastern producers, and the rest through spot markets.
But force majeure declarations by some Gulf suppliers have pushed BPCL to increase spot buying to keep refineries running at 115% capacity, Khanna said.
"Definitely, our spot volume has gone up considerably in recent times because of all the uncertainty."
BPCL operates three refineries in India with a capacity to process 706,000 barrels per day of oil.
The state-run refiner meets 40%-45% of its crude needs with Russian oil bought largely in the spot market after Washington granted sanctions waivers, Khanna said, although discounts have narrowed sharply.
Premiums on Russian crude have fallen to $5 to $6 per barrel to dated Brent on a delivered basis from $10 to $12 earlier, finance director Vetsa Ramakrishna Gupta said.
Despite recent fuel price hikes, BPCL continues to incur a revenue loss of 25 to 30 rupees (26 to 31 U.S. cents) per litre on diesel and 10 to 14 rupees per litre on petrol, Gupta said.
BPCL expects spot purchases to ease if Saudi Arabian contracted supplies improve after the restoration of the Kingdom's east-west pipeline capacity.
Saudi Arabia is currently giving only "a small commitment” for supplies through the pipeline, Gupta said.
BPCL is also evaluating annual supply deals with new producers for next year if they offer flexible delivery terms and competitive pricing, although the company prefers sourcing from nearby regions over distant suppliers such as Venezuela and Canada.
The refiner also has an optional annual crude purchase arrangement with Brazil.
Earlier on May 19, BPCL reported a 42.6% rise in fourth-quarter profit before exceptional items and tax to 86.07 billion rupees ($892 million), helped by steady fuel demand.
($1 = 96.5325 Indian rupees)