India is halting a plan to spend as much as $600 million, or 50 billion Indian rupees, on topping up its strategic crude reserve amid volatile prices as the government looks to reduce the country's fiscal deficit, sources with knowledge of the matter told Bloomberg on Wednesday.
India has also opted to stay away from purchases for its strategic petroleum reserve in view of the possibility of further declines in oil prices amid a bearish outlook on oil fundamentals in the early months of 2024.
India's government has thus decided to lease the unused and empty storage to oil majors and refiners, Bloomberg's anonymous sources said.
India's underground Strategic Petroleum Reserve (SPR) storage has a total capacity of 5.33 million metric tons of crude oil, equal to only 39 million barrels of crude oil, or eight days' worth of India's oil consumption. The storage sites are located in Vishakhapatnam in the state of Andhra Pradesh, and Mangaluru and Padur in the state of Karnataka.
Back in 2020, when oil prices crashed early in the pandemic, India took advantage of the low crude oil prices in April and May 2020, and filled its Strategic Petroleum Reserves to capacity. India used the ultra-low crude oil prices in 2020 to top its strategic petroleum reserves with oil at $19 a barrel, saving nearly US$700 million in the process, India's Ministry of Petroleum and Natural Gas said at the time.
Unlike other major oil consumers currently looking to fill strategic reserves as oil prices have dropped by around 20% since their 2023 peak of above $95 per barrel in September, India is not looking to top up its reserves currently.
As the government is looking to cut the fiscal deficit, it has also reportedly planned to halve the equity support to three state-held oil refiners to help them fund measures to meet their net-zero operations targets, Reuters reported exclusively last week, quoting industry and government sources.
By Michael Kern for Oilprice.com
Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com, More
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