Russia’s invasion of Ukraine opened up such attractive arbitrage opportunities that Reliance Industries Ltd. postponed maintenance work on the world’s largest oil refining complex to produce more diesel and naphtha after prices soared.
The refiner, owned by Indian billionaire Mukesh Ambani, is buying cut-price crude shipments after self-sanctions on Russian fuels by some European Union companies pushed margins on some petroleum products to three-time highs years.
Reliance’s giant twin refineries can process approximately 1.4 million barrels per day of almost any variety of crude. The company is also known for its agility in oil trading, which allows it to take advantage of price fluctuations.
“We have minimized the cost of raw materials by sourcing arbitrage barrels,” Deputy CFO V. Srikanth said in a briefing on Friday.
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Indian refiners have absorbed discounted barrels shunned by the United States and its allies seeking to isolate Vladimir Putin’s government. Russian oil flows to India are unsanctioned, and while the purchases remain tiny compared to India’s total consumption, they are helping to contain the rapidly accelerating inflation that is fueling protests across India. other parts of the subcontinent.
State and private refiners in the world’s third-largest oil importer have purchased more than 40 million barrels of Russian crude since the war in late February, Bloomberg reported.
Diesel margins jumped 71% in January-March from the previous quarter, while gasoline margins rose 17% and naphtha prices rose 18.5%, according to a company presentation .
Mumbai-based Reliance, which derives around 60% of its revenue from oil, reported quarterly profit below expectations on Friday, with rising tax burdens and costs in other parts of the conglomerate offsetting gains from fuel exports . Net profit rose 22% to 162 billion rupees ($2.1 billion) in the three months ended March 31, below the average profit of 168.2 billion rupees estimated by a Bloomberg survey of analysts.
“Reduced diesel imports by Europe from Russia and low global inventories” will support margins, Srikanth said. However, possible disruption from the coronavirus outbreak in China and other supply chain issues could hurt demand, he added.