Ministry Plan to Replenish Strategic Oil Reserves Put on Hold

Brent crude has already registered sharp decline by around 20% when compared with the peak price recorded in September last year.

SEATTLE (Oil Monster): The Finance Ministry of India announced that it has put on hold the previously announced $602 million plan to replenish the country’s strategic oil reserves. The decision is mainly driven by prevailing volatility in market and expectations of a further decline in oil prices in future.

Brent crude has already registered sharp decline by around 20% when compared with the peak price recorded in September last year. An ample supply situation could lead to further price declines. This has prompted the Ministry to postpone purchases, the Ministry official said.

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Accordingly, it has asked Indian Strategic Petroleum Reserves Ltd. (ISPRL) to lease out empty underground storage to refiners and global oil majors, although refiners have extended cold response. Around 13.5 million barrels of storage space at Visakhapatnam and Mangalore are currently empty. One of the two caverns at the Mangalore site has already been leased to ADNOC. The Ministry has asked ISPRL to do the needful to lease out the second unit as well.

The country has a total oil storage capacity of 39 million barrels for use in case of any emergency. It had filled the reserves in 2020, but has released almost one-third of the reserves to local refiners in the subsequent years.