Covid effect: Crude oil import to fall 8.9% in FY21

Due to lower demand of petroleum products amid the lockdown to contain the outbreak of the coronavirus, India’s crude oil import is likely to fall by 8.9% in FY21, according to Care Ratings. Since people are likely ‘to be sceptical to travel anywhere any time soon post the lockdown period’, analysts pointed out that consumption of crude oil is likely to fall by 7.3% during FY21, as refiners will regulate crude processing according to the demand of petroleum products.

Against the projected $111.3 billion (233 million tonne) for FY20, India imported just $101.4 billion (227 million tonne) of crude oil in the fiscal, which was 9.4% lower than in the year-ago period (in dollar terms).

“Refiners have almost stocked up on cheap crude oil as directed by the government but till the lockdown has not completely been lifted there won’t be a significant increase in demand for oil products,” the rating agency noted. On top of that, India has already ramped up its strategic oil reserves since mid-March in view of the slump in crude prices and hopes to fill it to the brim by May-end.

Care Ratings also noted that domestic crude oil production for FY21 is seen to fall by 7.3% as ‘given the sharp fall in oil prices, crude oil explorers will be dissuaded to carry on with exploration’. As FE recently reported, with domestic crude production becoming increasingly unviable in the low global oil price regime, the government has decided to revise production sharing contracts (PSC) of private oil producers to spur investments.

In this regard, the ministry of petroleum and natural gas has formed a committee which will ‘suggest ways of attracting investment in exploration, enhancing production and eliminating obstacles’. The 32.2 metric tonne of crude oil produced in the country in FY20 was 0.9% lower than a year ago.