Oil falls in second straight session as virus lockdown cools demand

Oil prices fell for a second straight session on Monday as coronavirus cases rose in the United States and other places, leading countries to resume partial lockdowns that could hurt fuel demand.
Brent crude dropped 66 cents, or 1.6%, to $40.36 a barrel by 1150 GMT while U.S. crude was at $37.86, down 63 cents, or 1.6%.

Brent crude is set to end June with three consecutive monthly gains as OPEC+ supply cuts and as oil demand improved after countries across the globe eased lockdown measures.
However, global coronavirus cases exceeded 10 million on Sunday as India and Brazil battled outbreaks of over 10,000 cases daily. New outbreaks are reported in countries including China, New Zealand and Australia, prompting governments to impose restrictions again.
"The market continues to fret about the recovery in demand as authorities reviewed reopening strategies," ANZ analysts said, referring to the three most populous U.S. states - Texas, Florida and California.
Despite efforts by the Organization of the Petroleum Exporting Countries and their allies including Russia to reduce supplies, crude inventories in the United States, the world's largest oil producer and consumer, have hit all-time highs.
"There is also a risk that gains in prices recently could see some U.S. shale producers restart wells," ANZ said.
Even as higher oil prices prompt some producers to resume drilling, the number of operating oil and natural gas rigs dropped to a record low last week.
U.S. shale oil pioneer Chesapeake Energy Corp filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of coronavirus outbreak on energy markets.

Oil price slump: Centre may not hike excise duty for petro products

The Centre has ruled out an increase in excise duties on petroleum, and believes that softening global crude prices would dampen inflation, which would induce the Reserve Bank to cut policy rates.
“We are not in favour of an excise duty hike as that would add to inflationary pressures for the end-users. Softening inflation due to oil prices would increase consumers comfort,” a top government official said.

“The crude oil prices have led to bond yields also coming down. This will also have a counter-inflationary impact, and could lead to a situation which is conducive for a rate cut,” the official said. On Monday, the yield on the benchmark 10-year Indian government debt slid below 6 per cent for the first time since 2009. It ended trading down 12 basis points to 6.07 per cent.
For 2019-20, the Centre had estimated average crude price of $55 a barrel, and for 2020-21, it has been assumed at $50 a barrel. The official admitted the crude price crash would be beneficial for them on the fiscal front, but declined to give details.
Analysts believe the steep fall in the international oil prices would give the government a bonanza in terms of reduced current account deficit (CAD), even as it may not have much impact on reining in the Centre’s fiscal deficit.
ALSO READ: Oil price crash: Domestic petrol, diesel prices may fall in the near future
So far as the Centre’s fiscal deficit is concerned, economists don't believe that declining oil prices would impact it much. Nowadays, the burden of subsidies to the government comes for only LPG and kerosene. These subsidies were estimated at around Rs 38,000 crore for 2019-20, against about Rs 25,000 crore a year ago and Rs 41,000 crore in FY21.
The Centre might not be as adversely placed in terms of revenues as its taxes on petrol and diesel are lump sum. On the other hand, states would be much worse affected as their taxes — value added tax — are ad valorem.
Karnataka has already increased value-added tax. Aditi Nayar, principal economist at ICRA, believed other states would follow suit.
chartSo far as CAD is concerned, every $10 a barrel decline in oil prices could improve CAD by 27 basis points, according to the calculation made by Soumya Kanti Ghosh, chief policy advisor at the SBI group.
CAD is essentially a gap between what the country receives imports and what it pays for exports of goods and services but excludes capital accounts such as money that comes in and goes out from the stock markets.
Nayar pegged CAD at 0.9 per cent of the country’s gross domestic product for FY20 at the current oil prices, against 1 per cent that she was expecting earlier. She expected the deficit to come down to just 0.2 per cent of GDP in the fourth quarter of 2019-20, against 0.9 per cent in the third quarter and 0.7 per cent a year ago.
CAD remained over 2 per cent in the first quarter of FY20 and the first three quarters of FY19.
Nayar also projected CAD at 0.8 per cent for the next fiscal year against her earlier forecast of 1 per cent.
Lower CAD basically means that the country would not require too much capital inflows to finance it.
Devendra Pant, chief economist at India Ratings, said the country was net oil importer and hence softening oil prices would dampen CAD.
For instance, India is projected to be a net importer by $56.4 billion in the current financial year.

Oil India to move TDSAT against DoT's Rs 48,489 cr demand over past dues

State-owned OilIndia is likely to move the TDSAT this week against the telecom department, seeking about Rs 48,500 crore in past dues on the surplus bandwidth capacity it had leased to third parties, its Chairman and Managing Director Sushil Chandra Mishra has said.
Other non-telecom firms, which have also been slapped with similar demands, too are likely to move the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).

Those likely to go to the TDSAT include gas utility GAIL India Ltd, from whom Rs 1.83 lakh crore has been sought, Power Grid Corp that has been slapped with Rs 21,953.65 crore liability and Gujarat Narmada Valley Fertilizers & Chemicals Ltd which faces a payout of Rs 15,019.97 crore.
Following the Supreme Court ruling of October 24, 2019 that non-telecom revenues should be included for considering payments of the government dues by firms holding any sort of telecom license, the Department of Telecommunications (DoT) slapped Rs 1.47 lakh crore demand on mobile phone operators such as Bharti Airtel Ltd and Vodafone Idea Ltd and another Rs 2.7 lakh crore from non-telecom firms.
Non-telecom firms such as OIL, GAIL and PowerGrid filed clarificatory petition on applicability of the October 24 order on them, but the apex court on February 14 asked them to approach the appropriate authority.
"As per our licence condition, any dispute has to be referred to TDSAT and so we will be approaching TDSAT within a weeks time," Mishra told PTI here.
On February 14, the Supreme Court had pulled up the DoT for not enforcing its October 24 order that gave telcos three months time to pay dues. Hours later, the DoT sent notices to Airtel and Vodafone Idea asking them to clear dues immediately but hadn't so far raised such demand with non-telecom companies, industry sources said.
OIL, the nation's second biggest state-owned oil producer, holds a National Long Distance Service Licence (NLD) with primary objective of monitoring and operation of its pipeline network.
The surplus bandwidth capacity available with the company was leased out to the telecom operators/other users, on which the company regularly paid the applicable license fee to the telecom department (DoT).
But after the October 24 Supreme Court ruling for including non-telecom revenues for calculating dues, the DoT included all revenues from oil and gas to seek Rs 48,489 crore from the company for the period from 2007-08 to 2018-19.
OIL believes that the October 24 judgement was not applicable to the company and had represented to the DoT stating that the demand raised is not sustainable either in law or on facts as the nature of licence in case of telecom service providers is different and distinct from the licences given to the company, Mishra said.
In case of GAIL, which held a IP-II licence, the DoT assessed Rs 1,83,076 crore as outstanding after including interest and penalty computed on the entire revenue of the company.
PowerGrid, which holds NLD and Internet Service Provider (ISP) licences, was asked to pay Rs 21,953.65crore (including interest and penalty) for FY 2012-13 to FY 2017-18 by adding revenue related to power transmission and consultancy as 'miscellaneous income' in adjusted grossrevenue, company sources said, adding the firm will approach the TDSAT in next few days.
Gujarat Narmada Valley Fertilizers & Chemicals Ltd, which had a Very Small Aperture Terminal (VSAT) and a Category 'A' ISP, was asked to pay Rs 15,019.97 crores for financial year 2005-06 to 2018-19.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Oil India moves SC against DoT's Rs 48,000 cr demand on Rs 1.47 cr revenue

State-owned Oil India Ltd (OIL) on Wednesday said it has filed a clarificatory/modificatory petition in the Supreme Court against a Rs 48,000 crore demand raised by the telecom department on cumulative revenue of Rs 1.47 crore it had earned on an NLD telecom licence.
Following the October 24 Supreme Court ruling that non-telecom revenues of telecom firms such as Bharti Airtel and Vodafone Idea should be included for considering payments of government dues, the telecom department asked OIL to pay Rs 48,000 crore in principal dues together with interest and penalty. The dues sought are double the net worth of OIL.

"OIL had obtained a National Long Distance Service Licence (NLD Licence) to establish Supervisory Control and Data Acquisition System (SCADA System) for control, management, and protection of OIL's pipeline network used for transportation of crude oil, natural gas, and petroleum products," the company said in a statement.
The NLD licence is predominantly used for the SCADA system and only the spare bandwidth capacity is leased out to other telecom operators.
"As per the licence terms, licence fee is to be paid on gross total revenue from services provided under the NLD licence. Since the award of NLD licence, the cumulative revenue of Rs 1.47 crore is earned by OIL from the leasing of spare bandwidth capacity on which all applicable licence fee and other statutory dues as per licence terms have been paid by OIL regularly," it said.
The company said based on the recent Supreme Court judgment "Department of Telecommunications (DoT) issued demand notices to OIL also seeking payment of licence fee on total reported revenue including revenue from sale of crude oil, natural gas etc, which neither relate to the NLD licence nor can be treated as supplementary/ value-added services related to the NLD licence." "Till date, OIL has received demand notices for the period from FY 2007-08 to FY 2018-19 amounting to over Rs 48,000 crore including licence fee, penalties and interest," the statement said.
OIL said it has taken up the matter with the DoT and the Ministry of Petroleum and Natural Gas along with other affected central public sector enterprises and "explained the non-applicability of interpretation of AGR to non-telecom companies," it said.
"On January 22, 2020, OIL has filed a clarificatory/modificatory petition before the Supreme Court against its order and the next course of action will be based on the outcome of the petition," the statement added.
From gas utility GAIL, the DoT has sought Rs 1,72,655 crore in dues on IP-1 and IP-2 licences as well as Internet Service Provider (ISP) licence. In response, GAIL has told the DoT that it owes nothing more than what it has already paid to the government.
The firm told DoT that it had obtained ISP licence in 2002 for a period of 15 years, which expired in 2017. But GAIL never did any business under the licence, and since no revenue was generated it cannot pay any amount.
On IP-1 and IP-2 licences, GAIL has told the DoT that it generated Rs 35 crore of revenue since 2001-02 and not Rs 2,49,788 crore that has been considered for levying past dues, they said adding the revenue number the DoT is considering is after adding all the revenues that the company earned from gas trading and transportation business.
Sources said the dues being sought are more than three times the net worth of GAIL and several times the actual revenue earned.
While telcos such as Bharti Airtel and Vodafone Idea may have had non-telecom revenues generated from using the government licence and spectrum, firms such as GAIL and OIL had no such revenue.
The DoT is seeking Rs 1.47 lakh crore from all telcos in past statutory dues.
Besides GAIL and OIL, the DoT is seeking Rs 40,000 crore from PowerGrid which had both a national long-distance as well as an internet licence.

Telecom dept seeks Rs 48,000 cr from Oil India in dues, firm to move TDSAT

The telecom department has slapped a Rs 48,000 crore demand notice on OilIndia in past statutory dues, an order which the country's second-biggest state oil producer plans to challenge in Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
Following a Supreme Court ruling that non-telecom revenues should be included for considering payments of government dues, the Department of Telecommunications (DoT) has asked Oil India to pay Rs 48,000 crore in principal dues together with interest and penalty for using optic fibre network for internal communication. The dues sought are double the net worth of Oil India.

"We have received a demand notice for paying payments by January 23. We plan to challenge it in TDSAT," Oil India Chairman and Managing Director Sushil Chandra Mishra told PTI here.
Oil India Ltd (OIL) is the second oil and gas firm after GAIL India to have been slapped a demand notice. From gas utility GAIL, the DoT has sought Rs 1.72 trillion.
Mishra said his company's contract with the DoT provides for any dispute to be referred to TDSAT and so the company will be approaching the tribunal.
Following the Supreme Court's October 24 order that non-telecom revenues earned by firms using spectrum or airwaves allocated by the government should be considered for calculating statutory dues, the DoT has totalled all the revenues earned by a company in last 15 years and raised demand.
Sources said companies like OIL pay excise duty, oil development cess, profit petroleum and other levies to the government on oil and gas they produce and do not trade bandwidth to outside parties to earn any revenue.
The optic fibre is only for internal communication purposes such as monitoring wells and production control, they said.
OIL is not going to the Supreme Court as the company was not part of the litigation before the apex court and no direction was issued to it by the court.
From GAIL, the DoT has sought Rs 1,72,655 crore in dues on IP-1 and IP-2 licences as well as Internet Service Provider (ISP) licence.
In response, GAIL has told the DoT that it owes nothing more than what it has already paid to the government.
The firm told DoT that it had obtained ISP licence in 2002 for a period of 15 years, which expired in 2017. But GAIL never did any business under the licence, and since no revenue was generated it cannot pay any amount.
On IP-1 and IP-2 licences, GAIL has told the DoT that it generated Rs 35 crore of revenue since 2001-02 and not Rs 2,49,788 crore that has been considered for levying past dues, they said adding the revenue number the DoT is considering is after adding all the revenues that the company earned from gas trading and transportation business.
Sources said the dues being sought are more than three times the net worth of GAIL and several times the actual revenue earned.
While telcos such as Bharti Airtel and Vodafone Idea may have had non-telecom revenues generated from using the government licence and spectrum, firms such as GAIL and OIL had no such revenue.
The DoT is seeking Rs 1.47 trillion from all telcos in past statutory dues.
Besides GAIL and OIL, the DoT is seeking Rs 40,000 crore from PowerGrid which had both a national long-distance as well as an internet licence.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Oil rises 3% to $63 after Iran shoots down US drone raising conflict fears

Oil rose by more than 3% to above $63 a barrel on Thursday after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington.
Expectations that the US Federal Reserve could cut interest rates at its next meeting, stimulating growth in the world's largest oil-consuming country, and a drop in US crude inventories, also provided support to prices.

Brent crude, the global benchmark, was up $1.73 at $63.55 a barrel at 1218 GMT, having earlier gained 3.3% to $63.88. US West Texas Intermediate crude rose $1.84 to $55.60.
"The risk of a military conflict in the Middle East has risen because of a ratcheting up of tensions between the United States and Iran," said Abhishek Kumar of Interfax Energy in London.
"Elsewhere, the US Federal Reserve has signalled its willingness to loosen monetary policy over the coming months, which is being perceived as favourable to oil demand."
The drone was downed in international airspace over the Strait of Hormuz by an Iranian surface-to-air missile, a US
official said.
Iran's Revolutionary Guards said the drone was flying over southern Iran.
Tension has been rising in the Middle East, home to over 20% of the world's oil output, after attacks on two tankers near the Strait of Hormuz, a chokepoint for oil supplies.
Washington blamed Tehran for the tanker attacks. Iran denied any role.
Concern about slowing economic growth and a US-China trade dispute has pulled oil lower in recent weeks. Brent reached a 2019 high of $75 in April.
The prospect of further rate cuts could prove the more significant factor for oil, said Petromatrix analyst Olivier Jakob, should Iran-US tension not escalate.
"The Fed and the cutting of rates is something that will provide more substantial support," he said.
Also propelling oil higher on Thursday was a decline in US crude inventories and the prospect of prolonged supply restraint by producer group OPEC and its allies.
US crude stocks fell by 3.1 million barrels last week, more than analysts expected, the Energy Information Administration said on Wednesday.
The Organization of the Petroleum Exporting Countries and allies including Russia agreed this week to meet on July 1-2, ending a month of wrangling about the timing.
The coalition known as OPEC+ looks set to extend a deal on cutting 1.2 million barrels per day of production. The deal expires at the end of June.

Oil, gas policy: Govt not to seek share of profits in less explored areas

In a major overhaul of oil and gas exploration permits, the government will not charge any share of profit on hydrocarbons produced from less explored areas as it looks to attract the elusive private and foreign investment to raise domestic output.
Breaking from the two-and-a-half decade-old practice of having a uniform contractual regime for all sedimentary basins in the country, the new policy provides for different rules for areas that already have producing fields and ones where commercial production of oil and gas is yet to be established.

Irrespective of the basins, producers will get complete marketing and pricing freedom for oil and gas in future bid rounds, said an official notification detailing rule changes approved by the Union Cabinet on February 28.
Oil and gas acreage or blocks in all future bid rounds will be awarded primarily on the basis of exploration work commitment, it said.
While companies will have to pay a share of revenue from oil and gas produced in Category-I sedimentary basins such as Krishna Godavari, Mumbai Offshore, Rajasthan or Assam where commercial production has already been established, they will be charged only prevalent royalty rates on oil and natural gas in the less explored Category-II and III basins.
"To expedite production, concessional royalty rates will be applicable if production is commenced within four years for onland and shallow water blocks, and five years for deep water and Ultra-deepwater blocks from the effective date of the contract," it said.
India began bidding out oil and gas exploration acreage in 1999 under New Exploration Licensing Policy (NELP) that awarded blocks to companies offering maximum work commitment. But companies were obliged to share with the government profits made after recovery of cost.
Two years back, the BJP-government brought in Hydrocarbon Exploration and Licensing Policy (HELP) that provided for blocks being awarded to companies offering maximum revenue at different levels of prices and production.
HELP failed to either raise output or attract new players.
The notification said the new policy was being formulated "to increase exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins, and enhance domestic production of oil and gas".
While blocks in Category-1 basins would be awarded on basis bided exploration work and revenue share in the ratio of 70:30, those "in Category-II and CategoryIII Basins will be awarded on the basis of international competitive bids based exclusively on the exploration work programme."
"The contractor will have full marketing and pricing freedom to sell on arm's length basis. Discovery of prices will be on the basis of transparent and competitive bidding. No exports will be allowed. There will be no allocation by Government," the notification said.
The Contractor will have liberal freedom to transfer/exit the block provided work programme has been adhered to. However, a suitable penalty mechanism will be devised for non-completion of the work programme.
The notification said that in case of the existing contracts, marketing and pricing freedom to sell on arm's length basis through competitive bidding will be permitted to those new gas discoveries whose Field Development Plan (FDP) will be approved for the first time after the date of issuance of the new policy.
In case of nomination fields given to national oil companies, marketing and pricing freedom will be provided subject to the condition that FDP for new gas discoveries is approved by DGH.
"To incentivise additional gas production from Administered Price Mechanism (APM) fields, reduction in royalty by 10 per cent of the applicable royalty will be granted on the additional production over and above Business As Usual (BAU) scenario. BAU scenario will be approved by DGH on third-party evaluation," it said.
Existing contracts already having marketing and pricing freedom would continue on the existing terms.

State oil cos recover as oil prices drop, but that's not helping consumers

State-owned fuel retailers have stopped absorbing a government-mandated cut of 1 rupee (0.014 U.S. cents) a liter in their marketing margins on the sale of petrol and diesel due to a steep fall in global oil prices, sources said.
In October, India's finance ministry had cut its production tax on the two fuels by 1.50 rupees a litre and had asked state-owned fuel retailers to reduce their marketing margins by 1 rupee a litre to insulate consumers from a surge in global oil prices at the time.

But oil prices have slumped in recent weeks allowing the marketing margin to be restored to its former levels, said a source privy to the matter.
In October, companies were told to gradually recover the reduction in the margins if crude prices fell, two finance ministry officials said.
"Now that the oil prices have come down they are now able to compensate the losses," one of the officials said.
It means that India's state-owned oil refiners, who are also its main fuel retailers, will not be passing on all the benefits of the drop in crude prices to consumers as they seek to recoup the margin hit they have been taking.
This is reflected, at least in part, by the relative difference in the recent declines of Indian fuel prices and global benchmarks. The price of Brent crude, Singapore gasoline and Arab Gulf Diesel have declined between 37-40 percent since October 1 while Indian petrol and diesel prices have been reduced by about 17-18 percent, according to Reuters calculations.
That loss of margin should be full reversed by the March end of the current fiscal year, the official added.
The sources declined to be named because of the sensitivity of the subject.
The state-owned retailers - Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp - control most of the fuel retail business in India.
Shares of fuel retailers pared losses in a falling Mumbai market after the Reuters report about the margins. From the day's lows, shares of IOC rose about 2.83 percent, HPCL about 5 percent and BPCL gained 3.79 percent.
The three companies did not immediately respond to Reuters' requests for comment.
Petrol and diesel prices in India are linked to Singapore gasoline prices and Arab Gulf diesel prices, which mostly track movements in crude oil prices.

India exempts rupee payments for Iran oil imports from hefty taxes: Report

The finance ministry has exempted rupee payments made to the National Iranian Oil Co (NIOC) for crude oil imports from a steep withholding tax, according to a government order reviewed by Reuters.
The exemption, put in place December 28 but backdated to November 5, will allow Indian refiners to settle about $1.5 billion of outstanding payments to NIOC. Those have been building up since Tehran was put under stringent US sanctions in early November.

The two countries on November 2 signed a bilateral agreement to settle oil trades through an Indian government-owned bank, UCO Bank, in the Indian currency, which is not freely traded on international markets.
However, the income of a foreign company that is deposited in an Indian bank account is subject to a withholding tax of 40 percent plus other levies, leading to a total take by the authorities of 42.5 percent.
ALSO READ: Iran oil waivers: How India, China are lining up after US exemptions
That made the agreement unworkable for Iran and led to the freeze in payments by the refiners until the exemption could be introduced.
Iran will be able to use the rupee funds for a range of expenses - including imports from India, the cost of its missions in the country, direct investment in Indian projects, and its financing of Iranian students in India, according to another government document reviewed by Reuters. It can also invest the funds in Indian government debt securities.
"In the previous round of sanctions Iran was allowed to use funds for imports from India but this time we have expanded the scope for use of funds to benefit both nations," said an Indian government official, who declined to be named because of the sensitivity of the issue.
The move may help India fix its trade balance, which is currently tilted in favour of Iran.
Payments to start soon
The tax exemption order, though, only refers to crude oil. That means it does not apply to imports of other commodities, such as fertiliser, liquefied petroleum gas and wax.
India, Iran's top oil client after China, has turned to paying for Iranian oil in rupees as major banking channels dealing in global currencies are closed off by the US sanctions.
"Passing of this notification eases constraints for Indian refiners to make payment," said Sanjay Sudhir, joint Secretary in India's oil ministry.
ALSO READ: Exemptions explained: Knowns and unknowns of US Iran oil sanction waivers
An official from India's top refiner and Iran's top customer in the country, Indian Oil Corp, said his company would start making payments to Iran from January.
The finance ministry did not respond to a request for comment.
Indian Oil Corp and UCO Bank also did not respond.
Last month, the United States introduced the sanctions aimed at crippling Iran's oil revenue-dependent economy because of its nuclear and ballistic missile programmes and its support for militant proxies in the Middle East. Washington did, though, give a six-month waiver from sanctions to eight nations, including India, and allowed them to import some Iranian oil.
India's overall imports from Iran totalled about $11 billion in April-November 2018, with oil accounting for about 90 percent of the imports.
Iran will be able to register as a foreign portfolio investor, allowing it to invest in Indian government debt.
The direct investment provision could help Iran in participating in Indian oil refiner Chennai Petroleum Corp Ltd's expansion plans. Iran owns 15.4 percent of the company.
Iran which used to be the third biggest oil supplier to India slipped to No. 6 in November, according to ship tracking data and industry sources.

India to import crude oil from Iran in Nov despite US sanctions: Pradhan

Oil Minister Dharmendra Pradhan Monday said two state refiners have placed orders for importing crude oil from Iran in November, the month when US sanctions on Iranian oil purchases take effect.
"Two of our oil companies have made nominations to purchase Iranian oil in November," he said speaking at The Energy Forum here. "We do not know if we will get waiver (from US sanctions) or not."
This is the first time Pradhan has spoken about India's stand on buying Iranian oil once the US sanctions on Iran come into force from November 4.
Later, talking to reporters, he said India has its own energy requirements which it has to fulfill.
"We will be guided by our national interest," he said.
Indian Oil Corp (IOC) Chairman Sanjiv Singh said his company is among the two which have placed order for November.
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"We have ordered for our usual quantity of oil," he said.

ALSO READ: US mulls waivers on Iran oil sanctions amid India's refusal to stop imports
IOC and Mangalore Refinery and Petrochemicals Ltd (MRPL) together have placed order for 1.25 million tonne (MT) of crude oil from Iran.
Singh said options for paying for Iranian oil are under discussions.
US sanctions against Iran will kick in from November 4, which will block payment routes. Paying in rupee is an option. Iran can use the rupee to settle its imports of pharmaceuticals and other goods from India.
"Even without sanctions also, Iran had been accepting payments in rupee. So let us see how it evolves," he said.
While India wants to continue importing Iranian oil, albeit a reduced volume, US Secretary of State Mike Pompeo last month stated that Washington would consider waivers on the embargo but made it clear that these would be time-limited, if granted.
Singh said IOC is importing the "usual" monthly volumes of oil from Iran. It had planned to import 9 MT of Iranian oil in 2018-19 financial year or 0.75 MT a month.
ALSO READ: China's Sinopec slashes Iran oil offtake by 50% under US pressure: Source
For rupee payments, oil companies could use UCO Bank or IDBI Bank to route oil payments to Iran, sources said.
India had planned to import about 25 MT of crude oil from Iran in 2018-19, up from 22.6 MT imported in 2017-18. But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others too are scaling it down in hope of winning a sanction waiver from the US.
Nayara Energy, formerly Essar Oil, too is stopping import from the Persian Gulf nation.
US President Donald Trump in May withdrew from the 2015 nuclear accord with Iran, re-imposing economic sanctions against the Persian Gulf nation. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.
Sources said Iran is open to accepting rupee payment for oil and may use the money to pay for equipment and food items it buys from India.
ALSO READ: US sanctions on Iran oil are credit negative for Indian refiners: Moody's
UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the US financial system.
UCO Bank had in the previous round of sanctions handled rupee payments.
Currently, India pays its third largest oil supplier in euros using European banking channels. These channels would get blocked from November.
During the first round of sanctions when EU joined the US in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought but beginning February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder pending till opening of payment routes. It began clearing the dues in 2015 when the restrictions were eased.
Besides, New Delhi sought to get around the restrictions by supplying goods including wheat, soybean meal and consumer products to Iran in exchange for oil.
Sources said this time around the entire 100 per cent of Iranian oil import bill can be paid in rupees.
Iran is India's third-largest oil supplier behind Iraq and Saudi Arabia. It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions over its suspected nuclear programme relegated it to the seventh spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 MT and 10.95 MT respectively from it.
Sourcing from Iran increased to 12.7 MT in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 MT to catapult it to the third spot.
ALSO READ: India to cut Iran oil import in Nov; Tehran may lose another major customer
Iranian oil is a lucrative buy for refiners as the Persian Gulf nation provides 60 days of credit for purchases, terms not available from suppliers of substitute crudes -- Saudi Arabia, Kuwait, Iraq, Nigeria, and the US.
Besides blocking of banking channels from November, the absence of payment mechanism may pose a challenge to the transportation of the oil as Iranian crude is bought on a CIF basis and shipped on Iranian tankers.
Under Cost, Insurance and Freight (CIF) mode of shipping, the seller assumes the responsibility of transportation and insurance. The liability and costs associated with successful transit are paid by the seller until the goods are received by the buyer.

India succumbs to US pressure; prepares for cut in oil imports from Iran

Oil ministry has asked refiners to prepare for a 'drastic reduction or zero' imports of Iranian oil from November, two industry sources said, the first sign that New Delhi is responding to a push by the United States to cut trade ties with Iran.
India has said it does not recognise unilateral restrictions imposed by the US, and instead follows UN sanctions. But the industry sources said India, the biggest buyer of Iranian oil after China, will be forced to take action to protect its exposure to the US financial system.

India's oil ministry held a meeting with refiners on Thursday, urging them to scout for alternatives to Iranian oil, the sources said.
"(India) has asked refiners to be prepared for any eventuality, since the situation is still evolving. There could be drastic reduction or there could be no import at all," said one of the sources, who has knowledge of the matter.
During the previous round of sanctions, India was one of the few countries that continued to buy Iranian oil, although it had to reduce imports as shipping, insurance and banking channels were choked due to the European and US sanctions.
The source said this time the situation is different.
"You have India, China and Europe on one side, and US on the other... At this moment we really don't know what to do, but at the same time we have to prepare ourselves to face any eventuality," said the source.
While a State Department official has said that Washington wants Iranian oil buyers to halt imports from November, US Ambassador to the United Nations Nikki Haley has told Prime Minister Narendra Modi to lessen dependence on Iranian oil.
Haley, currently in Delhi, spoke with US Secretary of State Mike Pompeo early on Wednesday, before meeting Modi.
The US push to curb countries' imports of Iranian oil comes after President Donald Trump withdrew from a 2015 deal between Iran and six world powers and ordered a reimposition of sanctions on Tehran.
Some sanctions take effect after a 90-day "wind-down" period ending on August 6, and the rest, notably in the petroleum sector, following a 180-day "wind-down period" ending on November 4.
OUTPUT BOOST FROM OPEC
Under pressure from the US sanctions, Reliance Industries Ltd, the operator of the world's biggest refining complex, has decided to halt imports.
Nayara Energy, an Indian company promoted by Russian oil major Rosneft, is also preparing to halt Iranian oil imports from November after a communication from the government, a second source said. The company has already started cutting its oil imports from this month.
Indian Oil Corp, Mangalore Refineries and Petrochemicals Ltd and Nayara Energy, the top three Indian buyers of Iranian oil, and the oil ministry did not respond to Reuters's request for comments.
Removing Iranian oil from the global market by November as called for by the United States is impossible, an Iranian oil official told the semi-official Tasnim news agency on Wednesday.
The options to find replacements to Iranian oil have widened after OPEC agreed with Russia and other oil-producing allies last week to raise output from July by about 1 million bpd, with Saudi Arabia pledging a "measurable" supply boost but giving no specific numbers.
Saudi Arabia's plans to pump up to 11 million barrels of oil per day (bpd) in July would mark a new record, an industry source familiar with Saudi oil production plans told Reuters on Tuesday.
The second source said there were plenty of options available in the market to replace Iranian oil. "There are companies and traders that are willing to give you a 60 day credit, crude is available in the market," the source said.
To boost its sales to India, Iran recently offered virtually free shipping and an extended credit period of 60 days.
"We can buy Basra Heavy, Saudi or Kuwait oil to replace Iran. Finding replacement barrels is not a problem, but it has to give the best economic value," a third source in New Delhi said.

False alarm! Petrol prices down by just 1 paisa to Rs 78.43/litre in Delhi

After news of a cut in petrol prices in the morning, India's biggest fuel retailer, Indian Oil has revealed that the announcement of a cut in prices it made earlier in the day was a mistake. It has revised the prices once again on its website.
IOCL informed ET Now that it had published wrong prices on its website earlier.
According to the Indian Oil Corporation website, petrol is now priced at Rs 78.42 per litre in Delhi. This is just 1 paisa lower than yesterday's price.
In Mumbai, petrol will be sold at Rs 86.23 per litre.
ALSO READ: Hardening petrol, diesel prices likely to weigh on RBI MPC meet from Jun 4
Earlier, it was reported that Indian Oil Corp had slashed the prices of petrol by 60 paise after 16 days of price hike. The new prices had been listed on their website as well. Petrol price in Delhi was cut by 60 paise to Rs 77.83 per litre.
The same is true for prices of diesel which were first reported to be cut by 56 paise today but now stand revised to just 1 paise less than yesterday's levels.

ALSO READ: Sebi likely to allow futures trading in petrol and diesel
Looks like the joy was shortlived as prices are now back to yesterday's level.
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Oil rises to $80 a barrel in London for first time since 2014

Oil rose to $80 a barrel in London for the first time since 2014 as US crude inventories fell and traders braced for the impact of renewed sanctions on OPEC member Iran.
Brent futures added as much as 1.1 percent to $80.18 on Thursday. US crude stockpiles slipped for a second week as the summer driving season approaches, government data showed on Wednesday. Goldman Sachs Group Inc. said America’s surging shale output won’t be able to replace the potential drop in Iranian oil shipments after the US reimposed sanctions on OPEC’s third-largest producer.

Crude has rallied this month to the highest level in more than three years after US President Donald Trump withdrew from a 2015 pact between Iran and world powers that had eased sanctions on the Islamic Republic in exchange for curbs on its nuclear program. While the International Energy Agency said a global glut’s been eliminated thanks to output curbs by OPEC, it warned high prices may hurt consumption and cut forecasts for demand growth.
“Supply concerns are top of mind after the US left the Iran nuclear deal,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich. “The geopolitical noise and escalation fears are here to stay.”
Brent for July settlement rose 66 cents to $79.94 a barrel on the London-based ICE Futures Europe exchange at 10:49 a.m. local time, after adding as much as 1.1 percent to $80.18 on Wednesday. The global benchmark crude traded at a $7.66 premium to WTI for July.
West Texas Intermediate crude for June delivery traded at $72.13 a barrel on the New York Mercantile Exchange, up 64 cents. The contract climbed 18 cents, or 0.3 percent, to $71.49 on Wednesday. Total volume traded was 33 percent above the 100-day average.
Futures for September delivery on the Shanghai International Energy Exchange gained 1.9 percent to 481.9 yuan a barrel, rising for a third day.
U.S. crude inventories fell 1.4 million barrels last week, while domestic production rose to 10.7 million barrels a day, the Energy Information Administration said on Wednesday. The specter of surging American output, which has topped 10 million barrels a day every week since early February, continues to place a cap on prices and undermine OPEC’s output cuts. Gasoline stockpiles also shrank last week by 3.79 million barrels, the EIA reported.
Members of the Organization of Petroleum Exporting Countries, including Saudi Arabia, Kuwait and the United Arab Emirates, said they have enough capacity to fill in any supply gap if renewed sanctions curtail Iran’s exports. Still, Goldman Sachs said the group won’t proactively replace the lost barrels, given its current narrative that the market isn’t fully re-balanced.

Govt may have to cut excise duty as price freeze hits oil firms' margins

Marketing margins of oil companies have come under severe pressure with the government freezing the daily revision of petrol and diesel prices ahead of the Karnataka polls.
According to an industry source, the average marketing margin on petrol and diesel has gone down from Rs 3.5 a litre on April 1 to Rs 1.9 a litre on May 1 for Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), a drop of about 45 per cent.

Interestingly, the average Indian basket crude oil price zoomed 8 per cent from $63.76 a barrel in April to $68.88 a barrel in May, while the domestic basket price was seen at $71.4 a barrel on Friday.
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The Karnataka Assembly elections are scheduled to be held on May 12.
The government stopped the hikes in fuel prices on April 23, when the international crude oil price was at over $74 a barrel. The price of Brent crude was $74.87 a barrel at one point on Saturday. For the last 13 days, prices of petrol and diesel have been static at Rs 74.63 a litre and Rs 65.93 a litre, respectively, in Delhi.
For every $1 rise in crude oil prices, the impact on the current account deficit is around $1 billion.
State-owned fuel retailers put in place an automated system last June to revise the prices of petrol and diesel on a daily basis, reflecting changes in international prices.
“I believe the companies will be allowed to cover up for their losses after the elections. The freeze on prices will have an impact on the accounts of companies during the current quarter. However, with rising crude prices, at some point of time, the government may have to cut the excise duty on fuel,” said ICRA’s Senior Vice-President K Ravichandran.
Govt may have to cut excise duty as price freeze hits oil firms' margins
The Centre now levies excise duty of Rs 19.48 a litre on petrol and Rs 15.33 a litre on diesel. The government had gone in for a Rs 2 cut in the excise duty in October, which it claims has led to a revenue loss of more than Rs 130 billion on an annual basis. However, when international prices were
low, the Centre’s share was increased nine times in a span of 13 months between November 2014 and January 2016.
The Centre has already asked states to slash their value-added tax on petrol and diesel. In the month of April, the average marketing margin was seen at Rs 2.97 and Rs 3.22 a litre for petrol and diesel, respectively.
“During the Gujarat polls also, companies lost more than Rs 1.5 a litre on marketing margins, which the government allowed them to recover later. So, I don’t think this will be a huge financial burden on companies on an annual basis,” said a Mumbai-based analyst.
“With improvement in the political scenario in North Korea and increase in shale supply from the US, there is likely to be relief on the pricing front,” Ravichandran said.
According to a report by CARE Ratings, with imports of 1,575 million barrels of crude oil on an annualised basis, a $1 increase in prices on a permanent basis will increase India’s yearly import bill by around Rs 100 billion, which is a major cause of concern for the government.

Crude oil near three-year high amid tight supply, trading above $68

Oil rose further above $68 a barrel on Tuesday, touching its highest since May 2015, supported by Opec-led production cuts and expectations US crude inventories fell for the eighth week.
The Organization of the Petroleum Exporting Countries and allies including Russia are keeping supply limits in place in 2018, a second year of restraint, to reduce a price-denting glut of oil held in inventories.

Brent crude, the international benchmark, was up 32 cents at $68.10 a barrel at 1311 GMT and earlier touched $68.29, its highest since May 2015. US crude rose 37 cents to $62.10 and also reached its highest since May 2015.
"Oil prices remain on an upward trajectory," said Carsten Fritsch, analyst at Commerzbank.
"In view of sharply falling US crude oil stocks and record-high compliance with the production cuts by Opec, market participants are convinced that the market is continuing to tighten."
Opec is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the United States, the world's largest and most transparent oil market.
Supply reports this week from industry group American Petroleum Institute and the US government's Energy Information Administration are expected to show US crude stocks fell by 4.1 million barrels, an eighth week of decline.
The API releases its data at 2130 GMT on Tuesday and the government report is out on Wednesday.
Many producers, still suffering from a 2014 price collapse, are enjoying the rally, although they are wary it will spur rival supply sources.
Iran said on Tuesday Opec members were not keen on increased prices.
Unrest in Iran, Opec's third-largest producer, has lent support to prices this year although output and exports have not been affected. Economic collapse is leading to involuntary production cuts in Venezuela, another Opec member.
There is no sign yet that Opec is prepared to relax its supply restraint.
A senior Opec source from a major Middle Eastern oil producer said on Monday Opec would boost output only if there were significant and sustained production disruptions from Iran and Venezuela.
The rise in prices is expected to drive gains in US production during 2018, offsetting curbs by others.
Still, the latest US rig count, an early indicator of future output, showed a slight dip in the amount of rigs drilling for new oil, which lent support to prices.