India’s crude oil stocks drop 15% amid Iran conflict, raising supply concerns

New Delhi: India’s crude oil stocks have fallen 15% since the Iran conflict began in end-February as refiners moved to maintain processing rates amid declining imports, according to estimates by commodities data and analytics firm Kpler.

Sustained supply constraints could eventually force refiners to cut runs or pull back on crude processing-a factor analysts say may partly explain Prime Minister Narendra Modi’s latest call for fuel conservation. India’s crude stocks are currently at 91 million barrels, slipping from 107 million barrels at the end of February, according to Kpler’s inventory data, which includes strategic petroleum reserves (SPR), commercial inventories, and refinery stocks. The estimates exclude pipeline stocks.

India consumes about 5 million barrels of oil a day, allowing current inventories to cover about 18 days of demand. The current crude stocks can feed up to 60 days of national consumption, the government said Monday, without elaborating. The stock estimate includes cargoes loaded on India-bound ships, said Sujata Sharma, joint secretary in the petroleum ministry on Thursday.

Moderate Drawdown
It also includes pipeline stocks.

India’s crude imports averaged 4.5 million barrels per day (mbd) in the past two and a half months, declining from the pre-war level of 5 mbd, said Nikhil Dubey, lead analyst, refining, at Kpler. “However, refinery run rates have not declined proportionally with the drop in imports, suggesting that part of the supply gap is currently being met through inventory drawdowns, most likely from refinery storage tanks.”

The current drawdown in inventories is “moderate”, said Dubey.

The drawdown could have been larger had Nayara Energy not undertaken a maintenance shutdown at its 400,000 barrels-per-day refinery in Gujarat in April, according to an industry executive.

“With near-term prospects for a reopening (of the Strait of Hormuz) appearing increasingly uncertain, India cannot continue relying on inventory drawdowns indefinitely,” said Dubey.

He warned that refineries may eventually need to reduce run rates in line with lower oil supplies. “This could also explain why the Prime Minister has recently called for fuel conservation efforts,” he said.

Global oil inventories fell by 129 million barrels in March, and by a further 117 million barrels in April, according to the International Energy Agency (IEA). “With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period,” the IEA warned Wednesday.

The near closure of the Strait of Hormuz has cut oil output from the Gulf by 14.4 mbd below pre-war levels. This has severely hit global oil supply, which declined by a further 1.8 mbd in April to 95.1 mbd, taking total losses since February to 12.8 mbd.

Saudi Arabia and the UAE-possessing alternative export routes-continued shipments, while Iraq and Kuwait-which depend entirely on the Strait of Hormuz -have been unable to export any volumes.