In order to curb the foreign exchange outflows, the state-run refineries are planning to reduce crude oil imports. Sanjiv Singh, the chairman of Indian Oil Corporation (IOC) on Monday told PTI that the company was looking at optimizing its inventory level without disturbing the domestic fuel supply in the country. Another report by Reuters quoted the director of Bharat Petroleum Corporation (BPCL) looking at options to reduce inventory as a coordinated effort among investors to cut costs.
The decision comes in the light of surging crude oil prices. International crude benchmark Brent has now reached $81.45 a barrel in five weeks from $71 per barrel. Additionally, the Indian rupee fell to new lows in the last one month, now nearing $73/dollar rate, making imports costlier.
In India, the petrol prices have hit new all-time highs at Rs 82.86 per litre in New Delhi, Rs 84.68 in Kolkata, Rs 90.22 in Mumbai and Rs 86.13 in Chennai.
The oil prices are rising due to the looming tension over US sanctions on Iranian imports starting 4 November. The Trump administration has been pressurizing governments and countries around the world to cut its purchases from Iran. US President Trump also demanded that the OPEC (Organization of the Petroleum Exporting Countries) should increase its supply to compensate for the shortage from Tehran.
Iran is the third largest oil producer among OPEC.
Further, on Sunday, despite Trump's demand, the OPEC after a meeting with its allies in Algeria, announced that it would not increase its output unless its customer demands for cargoes increase.
Britain, China, France, Germany, Russia, and Iran on Tuesday said they were determined to develop payment mechanisms to continue trading despite the sanctions by the US, but a Reuters report suggested that most analysts expect the sanctions to knock between 1 million and 1.5 million barrels per day (bpd) of crude oil supplies out of global market.