India has nearly doubled the amount of West African oil it will import in the first half of April, traders said, in a buying spree aimed at refiners building stocks ahead of purchases to fill the country's new strategic petroleum reserve (SPR).
The world's fourth-largest energy consumer has stepped up purchases of the Nigerian and Angolan crude for March and April, sparking interest from a market that is watching for stockpiling after oil prices crashed by more than 60 per cent between last June and January 2015.
Traders said Indian state-backed refiners, led by Indian Oil Corp, booked roughly 15 million barrels of West African oil to arrive in the first part of April - double what they usually import.
The stream of bookings has continued; in the past week, state-controlled oil refiners have booked a further 5 supertankers as part of a fleet of vessels that will load in West Africa in early April.
"We have heard many things - filling storage, buying less Iranian and coming out of (refinery) maintenance during April," one trader said. "IOC has done the bulk of the buying."
Indian refinery sources said they were forced into the current buying frenzy due to stock drawdowns at the end of the financial year.
While these are normal moves, state refiners this year, caught out by the plunge in crude prices, have lost at least Rs 30,000 crore ($4.76 billion) on oil inventories.
"We are buying oil for our own use and not for SPR," said IOC's head of finance A.K. Sharma.
State-controlled refiners Bharat Petroleum and Hindustan Petroleum have also been buying West African crudes, booking several vessels over the past few weeks.
Sources at the refineries said their lifting plans for March and April were as per schedule.
A drive to virtually eliminate Iranian imports in March also made West African grades more attractive.
India is building SPRs at three locations that together can hold more than 36 million barrels of crude to help protect the energy import-reliant economy from supply disruptions and price volatility.
While the first underground storage cavern at Vizag on the east coast, with space for 9.75 million barrels of oil, is ready to be filled, sources said none of the barrels booked now will end up there. The other two SPR facilities will be ready by October.
India has provided about $388 million (Rs 2,400 crore) to buy crude for the reserve in this budget year, enough to purchase approximately 6.5 million barrels at current prices, but the buying has not yet begun.
The International Energy Agency in its monthly report on Friday said that cheaper oil with help encourage India, as well as China and South Korea, to beef up strategic storage.
Any effort to fill India's strategic reserves, which will amount to roughly one-third of daily global oil demand, would absorb some of the global glut of oil and could help shore up benchmark prices.
Already, the spring purchases have boosted West African crude oil differentials versus the benchmark dated Brent price.
Grades popular among Indian refineries, such as Bonny Light and Qua Iboe, have seen their differentials rise to their highest level since the oil price started its near 60 percent slide in June last year.