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

Press Trust of India  |  New Delhi 

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

IOC, which buys 30 per cent (15 million tonne) of its requirement from spot or current market, had set up a trading office in in 2017 but has now developed and trading team to buy on a

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 have had a local trading desk for buying of crude and exporting fuel it produces, IOC would be the first to set up such a desk.

Sharma said the desk was used to buy 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 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 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."

IOC plans to transfer the trading desk once it stabilises in Singapore to do the real-time purchase of quantities of crude oil it buys from the spot market. Also, it could trade on fuel its refineries would export, he said.

The company buys about 70 per cent of its crude needs from oil such as of Saudi Arabia and of Iraq on annual term contracts. The rest is bought from the spot market through tenders.

Sharma said ultimately most of the spot purchases would be done through the trading desk. He, however, did not give a timeframe for moving to that.

Currently, one cargo of 1 million barrels are bought through trading desks at Singapore or at

Sharma said - the company's Singapore subsidiary - will ultimately handle the trading desk.

IOCL Singapore has two officers as compared to four traders plus and compliance officer at the trading desk in the national capital, he said adding the company will gradually increase its workforce in line with transactions.

Singapore is the trading hub for the world's biggest consumer region and an office there will help it have better access to information and speedier decision making.

Before 2017, would often lose out on opportunities to buy cheaper crude from the international spot markets as their sourcing policies required them to float a tender and obtain approvals from the before they could place an order.

The process used to take up to two months. While these had board approvals to set up offices abroad, they could not go ahead due to policy constraints and concerns over transparency in the public procurement policy.

The trading desk is part of progression IOC has seen in crude procurement policy since 2016 when the government gave flexibility to state refiners to devise their own crude import policies.

Prior to that, IOC used to take 26 hours to decide on a tender for import of crude oil from spot or current market.

In April 2016, after the Cabinet gave to devise their own crude import policies, the time has been shrunk to 12 hours.

Time for deciding on tenders for export of or fuel was cut to just 9 hours from the previous 35 hours.

"Earlier, we had a three-member committee comprising two company executives and one of the ministry of petroleum and to decide on awarding tenders for import of crude oil from the spot market. Now we have an internal committee which can take decisions quickly," he said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 15 2019. 13:10 IST