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Oil Round-Up

A good look at the Indian oil sector.

Oil marketmen have been riveted, of late, to the curious case of Mikhail Khodorkovsky, the ex-chief of Russian oil major Yukos, who was nabbed by Russian authorities for alleged misdemeanours (rumoured to include hobnobbing with elements that threaten the country's oil gameplan).

In India, 'oil' is typically mentioned in the same breadth as 'disinvestment', so it's not nearly half as exciting (unless you know things we don't). Otherwise, the sector has been behaving quite normally. Volatile, that is, which is to be understood as normal in this business.

Domestic demand for petroleum products declined in the first quarter of 2003-04, on account of the diesel fall caused by the transporters' strike. India's state-owned oil majors, Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp mLtd (HPCL) have bee performing rather well, despite a fall in refining margins (escaped by IOC on account of some complex deals struck earlier).

Reliance, meanwhile, has been operating its 27-million-tonne-per-year Jamnagar refinery way above its capacity. What analysts are watching most keenly, though, is the pace at which it sets up its proposed network of 5,800 petrol retail outlets (the company's thing for speed is legendary).

No report on oil can be complete without a word on which way global oil prices are headed. From the look of things, prices could stay above the $22-28 OPEC price-band for some time. Sudden flares are not likely, unless the elements of a worst-case-scenario begin to take shape. Nor is a repeat of the mid-1980s' oil flood likely; but that doesn't mean that the sovereignty of the sector's decision-making apparatus in Russia and Iraq is not under close watch.

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