IOC sets up trading desk at Delhi office to buy crude on real-time basis

India's top refiner Indian Oil Corp (IOC) has set up a trading desk at its office here to buy crude oil from international market on a real-time basis, helping it cut import price by locking in best price and quality, its Director (Finance) A K Sharma said.

IOC, which buys 30 per cent (15 million tonne) of its oil requirement from spot or current market, had set up a trading office in Singapore in 2017 but has now developed in-house software and trading team to buy crude oil on a real-time basis.

It made the first purchase through the desk on March 25 when it bought one million barrel of Nigeria's Agbami crude, he said.

While private sector firms like Reliance Industries have had a local trading desk for buying of crude and exporting fuel it produces, IOC would be the first state-owned refiner to set up such a desk.

Sharma said the Singapore desk was used to buy crude oil on a short-tender basis where the purchase was decided in two-hour time after receipt of offers from an international seller. This is compared to 10 hours taken to decide on purchase in traditional tenders.

But with a trading desk at its office in the national capital, IOC is deciding on purchases on a real-time basis, he said. "This helps us get the best price and most suitable, value giving crude," he said.

In traditional tenders as well as short tenders floated through the Singapore office, IOC would seek quotations from international sellers for a particular grade and quantity of crude oil. It would decide on the price based on the lowest bid rate with no scope of any negotiations on the offer.

However, with the trading desk now, it on a real-time basis negotiates with crude traders, often pitching price of one with another to get the best rate.

"We have set up a compliance process," he said. "We have established an in-house process where four traders, without interacting with one another, lock in best available price. A supervisor, who does not have the benefit of the identity of the seller, then instructs for further negotiations on an offer based on offers from other sellers. The traders then negotiate with the seller to bring down the price."