Indian refiners set to maintain high runs in Q4 as maintenance ends, festival season begins

Indian refineries are set to maintain robust run rates in the fourth quarter, extending the momentum from September, as demand for oil products is expected to surge in the quarter during the peak festival and agricultural season, industry sources and analysts told S&P Global Commodity Insights.

Refiners are closely monitoring the possibility of a steep increase in oil prices due to geopolitical tensions in the Middle East, but the sources said the likelihood of demand destruction currently appears minimal.

"Refinery runs will improve in the festival season, supported by higher domestic demand as well as due to a growth in crude import volumes," said an oil ministry official.

Indian refineries processed 5.2 million b/d of crude oil in September, according to the latest oil ministry data, rising 4.8% year on year.

The combined runs of all refineries -- including both state-run and private refineries -- were 2% higher in September from the 5.1 million b/d of crude processed in August. Analysts attributed this to the conclusion of the maintenance season for refineries and the end of the monsoon season.

High-demand season

The latest provisional data from the Petroleum Planning and Analysis Cell of the oil ministry showed that India's oil product demand fell 1.6% year on year to 17.92 million mt (4.7 million b/d) in September.

Oil product demand declined 2.7% month on month as above-average rainfall in September reduced the need for diesel to power pump sets for farmland irrigation. In addition, maintenance activities during the rainy season at refineries also slowed demand for oil products.

"But the trend is set to reverse in coming months. We are set to enter a high demand period and refiners are preparing to take advantage of that by keeping runs close to 100% or even higher," said one Indian refining source.

According to Commodity Insights, India's oil demand is set to grow by 3.5% to 4% year on year in the fourth quarter. Annual gasoline and diesel demand is expected to expand by 50,000-55,000 b/d in the quarter.

Trade sources said India's crude imports are expected to increase from October onward, as refiners look to cater to festival demand amid the end of the maintenance season.

India's crude imports rose 6% year on year to 18.56 million mt or an average of 4.5 million b/d in September, PPAC data showed. However, September imports fell 8% month on month to the lowest in seven months since February, as refiners utilized inventories due to a temporary slowdown in domestic consumption following excessive monsoon rains and maintenance shutdown at some refineries.

Eyes on oil prices

The Indian refining source said that "the oil market looks OK for now but can change quickly. Oil prices are up but crude is still affordable. We do not expect any big downward swings in oil demand at current levels, which would be good for our refiners."

Crude oil futures rose following the Oct. 31 settle amid reports that Iran was preparing to launch retaliatory strikes against Israel. At 1936 GMT, NYMEX December WTI was up $2.11 at $70.72/b and ICE January Brent traded $2.10 higher at $74.26/b.

Iran is preparing to attack Israel in the coming days, according to an Axios report citing Israeli intelligence officials. The move would mark an escalation in a conflict that most market watchers had considered settled following limited Israeli strikes on Iran on Oct. 25.

Commodity Insights expects Platts Dated Brent to average $81/b in 2024, but the market remains volatile currently. Despite ongoing tensions in the Middle East and other uncertainties, Commodity Insights expects Platts Dated Brent to reach the lower $70s/b in 2025, due to anticipated production increases from both OPEC+ and non-OPEC+, along with subdued global oil demand growth.

Over January-September, India'scrude oil inflows rose 2.4% year on year to 180.61 million mt (4.8 million b/d), mainly driven by attractively priced imports from Russia. The country relies on imports to meet about 85% of its domestic crude demand.