India's oil refiners are considering reducing their crude oil imports and drawing on inventories to try to cut their import costs amid high oil prices and a weakening local currency against the U.S. dollar, Reuters reported on Monday, citing refinery sources and top executives.
Over the past few months, rising oil prices and the weakening Indian currency, the rupee, have already created a perfect storm for India, where oil demand growth has been surging, but the higher oil prices are increasing the country's spending on crude oil imports, which account for 80 percent of Indian oil consumption.
Consequently, India-the world's third-largest oil importer-has been paying much more for oil in recent months.
For example, the value of India's oil imports in August 2018 stood at US$11.83 billion, up by 51.62 percent in dollars, and up 64.84 percent in rupees compared to August 2017, trade data by the Indian Ministry of Commerce & Industry showed. In April-August, the value of India's oil imports jumped by 53.55 percent in dollars and by 62.01 percent in rupees, compared to April-August last year.
Senior executives at some of India's top oil refiners confirmed to Reuters that they have recently held a meeting at which they discussed using more stockpiled crude and importing less oil in order to mitigate the combined effect of higher oil prices and weak rupee on the oil import bill.
"We are looking at various options to contain the costs including reducing our inventory. This will be a coordinated effort among refiners", R. Ramachandran, the head of refiners at Bharat Petroleum, told Reuters. "If need be, we will talk to other countries for a coordinated effort."
Last week, reports emerged that India may be planning to ask its state-held oil refiners to lock in the price of their crude oil futures purchases amid the sliding local currency and expectations of higher oil prices when U.S. sanctions on Iran return in early November.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More