In light of market volatility and the likelihood of more price declines, India's finance ministry scrapped a plan worth 50 billion rupees ($602 million) to replenish the country's strategic crude oil stockpiles.
The ministry is asking state-owned Indian Strategic Petroleum Reserves Ltd. (ISPRL) to lease out empty underground storage to refiners and international oil majors, according to Indian media, rather than purchasing at current levels.
The market price of Brent crude has already dropped about a fifth from a September peak and could fall further if supply remains plentiful.
India's oil storage capacity is restricted; in an emergency, it can only hold 39 million barrels of crude oil, which is barely enough to cover the nation's usage for eight days. About a third of the oil that was stored was released to nearby refiners after the 2020 drop in Brent crude prices filled the storage.
In contrast to other major consumers, the ministry decided not to replenish its reserves. This move comes as New Delhi aims to reduce its fiscal deficit from 6.4 percent of GDP in the previous year to 5.9 percent in the fiscal year ending in March. Instead, refiners have shown a limited amount of interest in renting the storage space.
The South Asian nation maintains three locations for its strategic oil reserves. There are reportedly currently 13.5 million barrels of unfilled storage capacity in Visakhapatnam and Bengaluru combined.
Abu Dhabi National Oil Co. has a lease on one of the two 5.5 million-barrel caverns at the Mangalore site. The finance ministry has requested that ISPRL talk to Adnoc and nearby refiners about leasing the second unit.