Domestic oil demand wouldn't return to normal in the near future: Indian Oil Chairman

New Delhi: Domestic oil demand wouldn’t return to pre-Covid levels anytime soon due to rapidly rising infections and local lockdowns, which would in turn keep company’s refinery run rate around 70-75%, lower than 93% seen in July, Indian Oil Chairman S M Vaidya said.
“It's very difficult to predict but, of course, one thing is sure that we will not get back to normal times at least in the near future,” Vaidya said of future oil demand. The Centre has been easing nationwide lockdown in phases but imposition of local lockdowns by several states have restricted mobility, economic activity and the demand for fuel. This has now slammed brakes on the rapid recovery in fuel demand seen during May and June. The rate of coronavirus infections in the country has accelerated with about 50,000 cases being reported daily.

Indian Oil’s refinery run rate has also fallen to 75% from 93% seen earlier in July. Vaidya expects refinery run rate to stay around 70-75% for the rest of the year. Lower domestic demand and an oversupplied export market are keeping runs low at Indian refineries.

Oil prices would likely hover around $40 a barrel in the second half of 2020, Vaidya said. Crude has more than doubled since late April to $43 a barrel.

Q1 profit drops 47%
Indian Oil’s profit dropped 47% in the April-June quarter to Rs 1,911 crore on inventory losses. The revenue for the quarter dropped 41% from a year earlier to Rs 88,937 crore on lower oil prices.

The gross refining margin for the quarter was negative $1.98 per barrel compared to $4.69 per barrel in the year-ago quarter. The company incurred an inventory loss of Rs 3,196 crore during the quarter compared to a gain of Rs 2,362 crore in the same period previous year. The company is, however, expecting to make inventory gains in the coming months, Vaidya said.

During the quarter, the sales of petrol declined 36% and that of diesel by 35%. The pandemic hasn’t altered Indian Oil’s capex plans and all projects will be funded by a mix of internal resources and debt. The company doesn’t intend to raise any equity.

Indian Oil sold 16.5 million tonnes of products, including exports, during the first quarter. The refining throughput was 12.9 million tonnes and the pipeline throughput was 15 million tonnes.