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MarketScreener Homepage  >  Equities  >  NSE India Stock Exchange  >  Bharat Petroleum Corporation Limited    BPCL   INE029A01011

BHARAT PETROLEUM CORPORATION LIMITED

(BPCL)
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Bharat Petroleum : India refiners getting rare oil cheap as China demand slows

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02/24/2020 | 02:14am EDT

Indian refining companies are snapping up rare crude grades as the coronavirus outbreak curtails China's demand for processing, executives and traders said, with prices for some grades falling by as much as 15%.

Chinese refiners have slashed output by at least 1.5 million barrels a day in February, or over 10 percent, after the virus outbreak hit domestic fuel demand, leading to swelling stocks.

"Opportunity for Indian markets is more in the context of what is happening in China and in recent times we received crudes which are appearing to be attractive as compared to their value earlier," said R. Ramachandran, head of refineries at Bharat Petroleum Corp.

Refiners in India, the world's third-biggest oil importer, rarely get the opportunity to buy suitable grades from areas like the Mediterranean and Latin America due to higher freight rates.

However, shipping rates have plunged by nearly half since the virus outbreak, and after the U.S. partially lifted sanctions on part of Chinese shipping firm COSCO.

BPCL will receive a million barrels each of Brazil's Sapinhoa and Mediterranean CPC blend in April, Ramachandran told Reuters.

It is also scouting for a million barrels each of Angola's Palanca, a grade BPCL processed years ago, and Nigerian Okoro "as pricing appears attractive" for April, he said.

"This is an opportunity for Indian refiners to buy new and rarely purchased grades that are available at cheaper rates," said Sri Paravaikkarasu, director for Asia oil at consultancy FGE.

Asia's spot premiums for Middle East, Russian, West African and Brazilian crude have all dropped this month with grades favoured by Chinese buyers, such as ESPO, Lula and Angolan, hurt the most.

"For the Brazilian and CPC blend we have seen crude cost lower by 10-15% compared to what we used to see," Ramachandran said.

Ample crude supplies allow other buyers to shop around and buy crude cargoes at cheap prices, although some Chinese refiners are also still chasing cheap supplies.

"For March-loading, April-arrival West African crude cargoes, premiums have dropped across-the-board," said a West African crude trader.

"Different crude grades are reacting differently... In general, most grades were down more than $1. Rare grades are very cheap," the trade source said.

National oil companies in China buy a lot of Middle Eastern heavy crudes and medium grades, while independents process medium-to-heavy sweet grades from Latin America and Africa.

"In spot tenders we are seeing a reduction in premiums. We are seeing offers for sale of new grades. Opportunities have increased," said M. K. Surana, chairman of Hindustan Petroleum Corp (HPCL).

"We are seeing offers for rare grades from Africa like Angolan Nemba and U.S. crude like WTI Midland at very competitive rates."

By Nidhi Verma and Shu Zhang

Stocks mentioned in the article
ChangeLast1st jan.
BHARAT PETROLEUM CORPORATION LIMITED -1.44% 274.75 End-of-day quote.-44.11%
HINDUSTAN PETROLEUM CORPORATION LIMITED -1.38% 167.9 End-of-day quote.-36.52%
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Financials (INR)
Sales 2020 2 937 B
EBIT 2020 92 193 M
Net income 2020 63 534 M
Debt 2020 445 B
Yield 2020 4,83%
P/E ratio 2020 8,35x
P/E ratio 2021 6,78x
EV / Sales2020 0,35x
EV / Sales2021 0,35x
Capitalization 596 B
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Mean consensus OUTPERFORM
Number of Analysts 33
Average target price 500,81  INR
Last Close Price 274,75  INR
Spread / Highest target 153%
Spread / Average Target 82,3%
Spread / Lowest Target 11,0%
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Managers
NameTitle
Rajkumar Duraiswamy Chairman & Managing Director
Neelakantapillai Vijayagopal Finance Director & Executive Director
R. Narayanan Executive Director-Information Systems
Ramamoorthy Ramachandran Director & Refineries Director
Vinay Sheel Oberoi Independent Non-Executive Director
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