Low oil prices are an opportunity for India to stock up on the commodity, and the pumps at Indian Strategic Petroleum Reserves Ltd’s (ISPRL) underground storage caverns are busy. The public sector company’s MD and CEO HPS Ahuja told BusinessLine on Saturday that the country’s storage caverns, in Visakhapatnam, Mangaluru and Padur (Karnataka), which together can hold 5.33. million tonnes (mt) of crude, will be full roughly by the third week of May. This represents nine days' normal times consumption.

Ahuja had said on April 7 that the caverns, as on that date, held crude to 56 per cent of their capacity. With some more oil put in, the stocks have gone up. However, on the basis of contracts for oil supply made, it would take till about the third week of May for the tanks to brim up.

(The SPRs are gigantic, man-made, underground caverns that are permanently sealed. Crude oil is put in and taken out through pipes. From floor to roof, they are as high as a 10-storey building and as wide as 12 Mercedes Benz cars. The crude is kept under ‘hydraulic confinement’ — water, carefully let into the rocks around the tunnel at high pressure, prevents the crude from seeping out. The ‘strategic petroleum reserves’ are meant to be a buffer against an event that might cause a disruption in supplies. Crude is regularly put in and taken out, but a quantity of crude is always there to fall back on in times of emergency.)

Viktor Katona, an oil trader at Hungarian oil and gas company MOL Group, wrote in Oil Price magazine on Wednesday that India’s SPRs had spare capacity to store “16-17 million barrels”, which roughly works out to 2.31 mt.

Katona, an oil expert at the Russian International Affairs Council, currently based in Budapest, also said Indian oil companies were re-routing deliveries arriving at Indian ports in April and May against contracts made in January and February, by selling it off to other countries. In his article in Oil Price, he mentioned Reliance as one of the companies that did it.

However, selling in times of glut is not easy. Hence the Centre had asked oil companies to fill up strategic petroleum reserve capacities. “With remarkably buyer-friendly market prices and an ongoing robust contango, the Indian government has specifically asked state-owned refiners — specifically Bharat Petroleum, MRPL and IOC — to fill SPR capacities,” said Katona.

It is never easy to perfectly time the purchase of stocks, with expert views varying widely on where oil prices might settle. For instance, Michael Grubb, professor of energy and climate change and Deputy Director, UCL (University College London) Institute for Sustainable Resources, feels that oil prices will never ever rise beyond $30-40 a barrel, because business travel and work-from-home practices have permanently changed the way people lead their lives.

A diametrically opposite view has been expressed by Jean-Louis Le Mee, Chief Executive of London-based Westbeck Capital Management, which runs the Energy Opportunity Fund. Recently, he made news by predicting that oil prices would rise again to $100 a barrel, after a year or so. Le Mee believes “we are on the other side of the pandemic” and demand would quickly rise after the Covid-19 episode ends and “we could even see unprecedented inventory draws.”

Similar views have been echoed by Narendra Taneja, a spokesperson of the BJP, who also advises the party on energy. Taneja has said that demand in India would normalise in seven days after the lockdown is lifted.

Taneja notes that very low oil prices is not an unalloyed boon for India — it cuts both ways.

There are 8 million Indians working in West Asia, he notes, whose fortunes depend upon the countries there getting a remunerative price for oil.