India is quickly running out of space to store a swelling stockpile of fuel as every possible container - including those in the 66,000 pump stations nationwide - threatens to overflow.
Refiners in India, the world’s third-biggest oil consumer, have filled 95% of about 85 million barrels of fuel storage capacity, according to officials at three state-owned processors.
The virus-inflicted lockdown of more than a billion people has pummeled India’s appetite for key transportation fuels as travel and movement remains restricted in large swaths of the world’s second-most populated country.
Options to stash away unwanted barrels are fast running out globally. The world’s biggest independent oil storage company, Royal Vopak NV, said it has leased out almost all available space to store crude and refined fuels due to the still-expanding glut that drove oil prices negative for the first time in history.
“Demand does not seem to be coming back fast," said R. Ramachandran, director of refineries at Bharat Petroleum Corp. “Major consumption centres like Mumbai, Delhi and Calcutta are in trouble now because of increasing coronavirus cases" as the nation struggles to contain the spreading pandemic.
Apart from BPCL, major state-owned refiners and fuel retailers include Hindustan Petroleum Corp and Indian Oil Corp. Spokespersons at the three companies did not immediately respond to emails and calls.
India’s refiners slashed runs to less than 50% at some units to counter a record slump in fuel demand in April as the world’s biggest lockdown emptied roads, halted flights and brought most economic activities to a screeching halt.
Consumption for diesel and gasoline, which account for more than half of India’s oil demand, dropped by more than 60% in the first half of April. Prime Minister Narendra Modi extending the lockdown until May 3 has dashed hopes of a sharp recovery.
Besides retail stations, Indian refiners also store petroleum fuels at more than 300 depots and terminals, as well as 250 aviation fuel stations. More than two-thirds of total capacity is used for storing diesel and another 20% for gasoline.
Overflowing tanks have forced Indian refiners to sell very prompt cargoes of oil products with some tenders offering loadings in about a week, compared with normal loading range of a three-four weeks ahead.
State-owned processors aside, the country’s biggest private refiner Reliance Industries Ltd. is probably sending cargoes to leased storage outside India, according to industry consultant FGE, which estimates India’s total oil product demand will plunge by 1.4 million barrels a day this current quarter from a year earlier.
State-owned giant Indian Oil Corp. has slashed run rates across its 10 refineries by almost half. Other refineries are likely operating at minimum utilization rates of about 35%, said Senthil Kumaran, an oil markets consultant at FGE.
“Both national oil companies and private refiners are sharply reducing crude throughput as they see product tanks filling to the brim soon," Kumaran said.