Benchmark Brent fell to around $72 a barrel Thursday, down from an average of $99 in first week of June and $109 during the three months till May. Russia has resumed offering discounts, reversing the hefty premiums it charged after the Iran war began.
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Refiners also expect to gain from Iran’s re-entry into international markets, the UAE‘s exit from the Organization of the Petroleum Exporting Countries (OPEC) and the continued availability of large Russian volumes, developments that are likely to intensify competition among suppliers and strengthen buyers’ bargaining power.
Since refiners are still processing high-cost crude purchased during the price surge, the benefit of cheaper feedstock will be reflected only in the July-September earnings.
If crude prices remain near current levels, refiners could post strong profits for the September quarter, particularly if retail fuel prices, about ₹8 per litre above pre-war levels, stay unchanged and the government does not reverse the ₹10 per litre fuel tax cut announced in March, said industry executives.
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“We are still living by the day,” said one of the executives, who did not wish to be identified, pointing to lingering uncertainties over the final shape of the US-Iran deal and the future of sanctions on Iranian and Russian oil. China’s next move is also being closely watched, he added.
China, the world’s largest crude importer, sharply reduced purchases over the past two months, helping keep global prices in check. Any move by the country to rebuild reserves could quickly tighten the market and drive prices higher.
India’s refiners are seeking the cheapest legally available crude while also trying to honour term-purchase commitments with West Asian suppliers now that the strait has reopened, executives said. Iraq, Kuwait, Qatar and Saudi Arabia, which either curtailed supplies or failed to deliver contracted volumes during the disruption, are again ready to meet their commitments. Some refiners have already begun placing orders and arranging logistics, while others are expected to resume lifting West Asian crude after a month or so, once existing supply arrangements run their course, executives said.