Aramco Says Saudi Drone Attack Won’t Disrupt Oil Supply To India
HPCL and BPCL do not see the Saudi drone attack as having an impact in the near term as they have enough stock of crude oil.
Saudi Arabian Oil Company has assured that a drone attack on its oilfield won’t disrupt oil supply to India, the oil ministry said on Monday.
The Ministry of Petroleum and Natural Gas is closely monitoring the situation in consultation with Indian refiners and Saudi Aramco, according to a media statement.
Saudi Arabia’s oil production was cut by half after explosive drones struck at the heart of the kingdom’s energy industry and set the world’s biggest crude-processing plant ablaze. Iran-backed Houthi rebels in Yemen claimed responsibility for the attack on Saudi Aramco’s Abqaiq plant.
India imports 75 percent of its oil requirement. Of this, about 40 percent comes from Saudi Arabia. The attack on Saudi Aramco’s plant led to the biggest intraday surge in crude oil prices on Monday. Gold and other precious metals, too, rallied as the Saudi drone attack raised the possibility of retaliatory U.S. military action in the Middle East.
Still, Indian oil marketing companies aren’t too worried.
N Vijayagopal, director (finance) at Bharat Petroleum Corporation Ltd. said the Saudi drone attack will not have major impact on the company in the immediate future because it has enough stock.
“The price level reached is not discomforting to us. We don’t expect this spike to continue for more than a month,” he told BloombergQuint. “We keep inventories for more than 16-17 days. We also have crude oil coming in transit from various places. Saudi Arabia is not the only place where we take crude oil from.”
Crude oil prices at $65-70 a barrel won’t be a problem, said Vijayagopal, but if it crosses the $90-a-barrel mark, oil marketers will pass on the cost to consumers.
MK Surana, chairman and managing director at Hindustan Petroleum Corporation Ltd., said Saudi Aramco has not declared a force majeure. “They are saying that they may be able to supply from the inventories. If they are supplying crude oil from inventories, then prices will cool off,” he told BloombergQuint.
“Already, prices have cooled off a bit now. What is unclear is how much time they will take to resume production to the earlier levels,” he said. “There are other countries also which supply crude oil to us. Therefore, we won’t be impacted much.”
Indian Oil Corporation Ltd. is yet to respond to BloombergQuint’s emailed queries.
Rating agency ICRA Ltd. said Indian refiners are expected to benefit from inventory gains in the short term due to increase in crude oil prices. Also, an increase in crude prices would lead to a rise in working capital borrowings and interest expense of refiners, it said in a report.
But Singapore’s DBS Banking Group cautioned that the strikes on Saudi oil facilities will hit India’s oil import bill and the Indian rupee will be the immediate casualty.
“Saudi Arabia is India’s second-largest supplier of crude and cooking gas. A 10 percent rise in crude prices widens India’s current account deficit by 0.4-0.5 percent of GDP,” newswire PTI reported quoting DBS’ Chief Economist for G3 and Asia Taimur Baig as saying. Every dollar move in the Brent prices adds around $2 billion to India’s oil imports bill, he said, adding the Indian rupee will be among the currencies which will be “the immediate casualties as it will be affected by large import bill”.