Brent oil posted its biggest intraday jump — to more than $ 71 a barrel — in opening trade on Monday and settled at around $ 67 a barrel amid uncertainty on how long Saudi Arabia may take to fix its facilities.
Rupee fell 0.8 per cent to 71.52 a dollar, ending its seven-day rally. The Sensex declined 0.7 per cent, reflecting the sour sentiment in the market and overshadowing the government’s stimulus measures announced over the weekend.
The 5.7-million-barrels-perday of lost production in Saudi Arabia is the single biggest disruption on record and has wiped out 5 per cent of global supplies.
Oil cos plan for alternative supplies
International prices of petrol and diesel also soared, and if they stay that way, domestic fuel rates could go up.
State-run oil companies, which dominate the local fuel market and act as price-setters, are expected to review prices daily by taking the average of international fuel prices and currency rates for the trailing fortnight. But lately, companies have not strictly followed this, hinting at the possibility that price spikes may not necessarily get passed on to consumers quickly.
“The market sentiment has been affected, which is why prices are up. But for us, there is no effect in the physical market. Ships are still loading,” oil minister Dharmendra Pradhan told ET, shrugging off concerns about supply disruptions.
Saudi Arabia accounted for a fifth of India’s crude imports in FY19 and was expected to supply more this year as imports from Iran have dried up due to US sanctions.
“We have reviewed our overall crude oil supplies for the month of September with our oil marketing companies. We are confident there would be no supply disruption to India. We are closely monitoring the evolving situation,” Pradhan said later in tweet.
Saudi Aramco assured Indian refiners on Sunday that there would be no supply shortage, the oil ministry said.
Aramco, however, is offering different grades of oil in some cases due to the production cut, said an executive at a state-run oil firm.
Despite supply assurances, oil companies have begun planning for an alternative supply situation should Saudi facilities not return to normal quickly, said another official of a state oil firm.
India has about 60 days of crude oil inventory, which includes tankages and pipelines of refiners as well as the three strategic storages. Its strategic petroleum reserves have a combined capacity of 5.3 million tonnes.
The 1.33-million tonne reserve at Visakhapatnam is fully filled while the 1.5-million tonne capacity at Mangalore is half filled and the 2.5-million tonne storage at Padur is about a quarter filled, according to officials.
US President Donald Trump has authorised the release of oil from the American emergency reserve, even as other major consumers in Europe and Asia are evaluating the option of drawing down from their emergency stockpiles.