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Indian Refiners Hit Again by Market Slowdown, Impose Throughput Cuts to Support Fading Margins

Slowed fuel demand and globally contracted refining margins have led major Indian Refiners opt for curtailed operations at their crude processing units and go for maintenance turnarounds. India’s fuel demand witnessed a freefall in April when nation-wide lockdown was imposed to contain the spread of COVID-19. However, there has been a considerable demand growth since May as per the domestic fuel retailers. This demand growth seems to offset in July as local refiners reported a significant fall in fuel demand due to multiple factors. Rising fuel prices further exacerbated by renewed lockdown in several states of India and monsoon rains hitting several industrial and construction activities hampered the market outlook. According to Bharat Petroleum Corporation’s (BPCL) refinery head, Mr. R. Ramachandran, the company is operating its three refineries nearly at 70% capacity compared to about 90% in June starting. IOCL is currently utilizing its capacity up to 80%-85% compared to 97.7% in June. Indian refineries’ crude throughput rates dived by an annual 13.6% in June as compared to 29% decline in April this year. Crude processing is likely to decrease further in August as the country’s major refiners such as Indian Oil Corporation (IOCL), Reliance Industries (RIL) and BPCL are going for maintenance shutdowns sensing low demand patterns. Although refiners usually refrain from carrying out any maintenance related work during monsoon, overflowing crude inventories and demand downturn made it favorable for them to go for it as the nation is now heading towards festive season when the demand uptick could be sensed.