• Spot crude buying time cut to two hours

    Indian Oil Corporation (IOC) has brought down the buying time for some of its spot cargoes to two hours, sharply shrinking from 30 hours just one and a half years ago, a move that would help the country’s largest refiner bring down crude cost and boost margin.

    IOC picks 30% of its crude from the spot market, a share that went up from 20% in the past two years as state refiners tried to take advantage of the falling crude prices. Last year, the state refiners were also unshackled by the government to decide on their spot purchasing mechanism, which has now helped IOC drastically reduce purchase time.

    For the past few months, the company has undertaken a pilot in which it calls for pre-specified crude from pre-specified sellers within a price band, a company executive said. Each transaction has taken about two hours and the company has been able to purchase a few cargoes so far, the executive said.

    This is less than one-fourth of the usual nine hours taken currently for the tendering process in the spot market. Even nine hours is a huge improvement over nearly 30 hours that the company took earlier.

    “If you accept an offer in a very short duration, you get the price advantage. As you delay, the time risk gets priced in,” said the executive, adding that the effort is towards reducing purchase time so that the company is able to source cheaper crude and is on an equal footing with private refiners.

    IOC plans to import 50.3 million tonnes of crude oil in 2017-18, about 0.9 million tonne higher than in the current year. The increase in supply will likely be absorbed by the 15 million tonnes Paradip refinery expected to reach 100% capacity utilisation next fiscal year from about 80-85% now.

    With 15.6 million tonne, Iraq is the biggest supplier to IOC. Saudi Arab comes second with 5.7 million tonnes.

    The third spot is shared between Kuwait and Iran with 5 million tonnes each. The UAE supplies about 2.5 million tonnes.

    West Asia remains a big source of supplies to IOC, which controls about a third of the Indian refining capacity, and has been diversifying its supply bases to multiple regions. A global collapse in oil prices in the past two years has boosted the bargaining power of big crude importers like India with respect to the oil producers. Marcus Maye Womens Jersey

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