Indian Oil Corporation (IOC), the country’s biggest refiner and fuel retailer, doesn’t expect its capacity utilization to return to pre-pandemic levels in the near future, IOC’s chairman S.M. Vaidya told reporters on Friday.

IOC had been gradually boosting its refinery capacity utilization since May, but utilization has been down in recent weeks as many states in India re-imposed localized lockdowns, after the nationwide lockdown in April-May, following a surge in COVID-19 cases.  

IOC’s capacity utilization has dropped to 75 percent these days, from around 93 percent in the first week of July, Indian media quoted the company as saying alongside its results for the first quarter of its 2020-2021 financial year.

In May, India’s fuel demand picked up pace from the April lows, and IOC began to gradually boost operations across its refineries, aiming to raise utilization to 80 percent by the end of May, compared to 45 percent in early April.   

At the end of June, Indian Oil Minister Dharmendra Pradhan said that fuel demand in India was set to rebound to pre-crisis levels by the end of September.

Yet, India’s crude oil imports slumped in June to their lowest levels since 2011, with oil refiners buying less crude because of maintenance and weaker demand, according to data from industry sources reported by Reuters.

Indian refiners are now cutting processing rates because fuel demand – up from the lows in April and May – has slowed this month as fuel prices are higher and parts of India are again under local lockdowns, while the monsoon rain season is also stalling economic activity and transport, officials at refineries told Reuters this week.

Shell’s chief executive Ben van Beurden said on the supermajor’s earnings call on Thursday that India is the worst-performing market in terms of demand, while China continues to be resilient.

“The worst-performing market is India, 45% down. So, we are dealing with a very wide tapestry of market recovery archetypes,” van Beurden said.

By Charles Kennedy for Oilprice.com

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