Crude Oil Prices To Stabilise Around $65-$70 Per Barrel: Indian Oil Chairman

Crude oil prices are expected to remain stable at around $65 to $70 per barrel for the rest of the financial year, according to AS Sahney, chairman of Indian Oil Corp. It could go below the $65 level as well.

“There is still some room for it to go downwards. What I see is very much near to $65, plus or minus one or two dollars, is the right place where we will be comfortable. There is an oversupply in the system today and there is also a view that there is much more supply which is still expected to come,” he said during a conversation with NDTV Profit on Monday.  

The current level is the "right place" he said. Sahney expects the price to go a couple of notches down from here.

The chairman outlined that Russia now accounts for approximately 30-35% of the entire industry's crude imports. For Indian Oil, the figure hovers between 20% and 24% on a monthly basis. 

The top executive rejected any notion of a geographically driven policy, insisting that procurement decisions are based purely on economic and commercial factors.

“We are not going by geography; we are going by commerce. Whatever crude is giving me a better delta, that is the only criterion,” he said.

With global prices around the $65-$70 mark, the unique price advantage once offered by Russian crude has diminished, making it a level playing field, Sahney explained. "It is a purely commercial decision that our refineries have to take."

For the oil industry as a whole in India, about 40% of crude comes from the Middle East, with the remaining 60% sourced from other regions. Indian Oil sources crude from approximately 40 countries, the chairman said.

“We are more open to crudes from newer sources also because that gives me a better energy security paradigm,” he emphasised.

Discussing the refining business, Sahney highlighted diesel as the most profitable product for Indian refiners, followed by petrol (motor spirit) and aviation fuel.

Addressing speculation about increasing oil and gas imports from the US to balance trade, Sahney reiterated that decisions are driven by economics, not geography.

“Most of the LPG from the US is going to China as of now. But because of these trade things, there is a possibility that now LPG from the US might find a home in India and the Far East countries other than China. So, there is a situation wherein LPG will start coming to India,” the chairman stated. 

Indian Oil plans significant capital expenditure in petrochemicals once its ongoing refinery expansions are complete. The company's integrated model, such as using its own refinery outputs as feedstock, provides a distinct cost advantage, he said.

“I am producing my own naphtha, my gas from the refineries and that is being used for our petrochemicals. So, at an integrated level, I can always say that petrochemical is a go-to business for Indian Oil,” he said.

“When the cycle is low, that is the time when we have to start investing so that we can catch up with the next big cycle," he added.

Shares of Indian Oil were trading 1.21% higher at Rs 153.45 apiece on the NSE at 12:04 p.m., while the benchmark Nifty 50 was down 0.11% at 25,433.5.