Bharat Petroleum Corp. reduced its refinery throughput in May as pandemic-induced lockdowns by many states have hit demand for transportation fuels across India.
The oil refiner and marketer’s throughput stood at 8.39 million tonnes in the quarter ended March, annualised to 33 million tonnes. While demand was higher as the economy emerged from the first wave of the Covid-19 pandemic in the third and fourth quarters of the last financial year, it fell in May following the lockdowns.
“April was good, we were able to process 100% of the refinery capacity,” N Vijayagopal, director of finance at BPCL, said in an interaction with BloombergQuint. “However, in May, state-level lockdowns reduced the demand for products—motor spirit (petrol) and high-speed diesel (diesel).”
As a result, throughput has been restricted to 85-86% of BPCL’s design capacity in May. Although demand for both fuels was lesser by a third compared to a normal year, it’s higher than a year ago, when a nationwide lockdown was imposed, Vijayagopal said.
BPCL isn’t expecting demand to improve next month. “We don’t anticipate any major increase in demand in June because most of the major states have announced an extension of the lockdown,” he said.
The company had built up its inventory since the quarter ended December anticipating demand. Its inventory gain in the fourth quarter was Rs 1,800 crore.
“We had contracted crude anticipating that the Covid-19 pandemic has ended in the country and now we may not be able to process as much of it as we would like to,” Vijayagopal said. “However, crack spreads on motor spirit and high-speed diesel look better this quarter compared to the fourth quarter—which was the highest in FY21,” he said. “We’ll look at exports if it makes sense.”
The company doesn’t foresee any inventory losses if crude oil prices fall in the remaining quarter. During the first three months of the year, Brent crude price rose by nearly a fourth to $63.5 per barrel and is currently trading around $68.
Vijayagopal said BPCL “won’t have any issues” if oil prices decline in June, adding they won’t be having huge inventory gain going along in the first quarter of the ongoing fiscal.