BPCL Set To Launch Trading Desk In Singapore, Dubai — Here's How It Is A Strategic Move In Crude Oil Market

State-owned Bharat Petroleum Corporation (BPCL) is planning to establish a trading desk in Singapore or Dubai to broaden its global presence and enhance its sourcing and trading activities for crude oil and finished products, according to a report from The Economic Times.

The trading desk is expected to be operational this year and will enable BPCL to engage in energy derivatives trading and facilitate international financing.

Trading desks are crucial in the international oil market for buying and selling products, with trades executed instantly by licensed traders.

It also enables companies to procure crude oil from the global market in real-time, helping them secure the best price and quality and potentially reduce import costs.

Setting up a trading desk in Singapore or Dubai, which are key hubs for oil trading, will provide BPCL with strategic advantages, allowing the company to secure better commodity deals.

The recent disruptions in the crude oil supply chain due to the Russia-Ukraine conflict have compelled Indian refiners to explore alternative sourcing options beyond the Middle East, traditionally a major source of oil supplies for India.

A trading desk offers BPCL greater flexibility in entering and exiting markets quickly, as operations are conducted round the clock. This flexibility will facilitate faster turnaround on crude oil trading and provide operational agility.

In the last fiscal year, BPCL procured 38.2 million metric tonnes per annum of crude for its refineries in Mumbai, Bina (Madhya Pradesh), and Kochi.

The company also processed five new grades of crude oils for the first time, as stated in its FY2023 annual report.

India, the world's third-largest consumer of crude oil, relies on imports to meet more than 85 per cent of its requirements.

Indian public sector refiners, including Indian Oil Corporation (IOC), BPCL, and Hindustan Petroleum Corporation (HPCL), source 70 per cent of their crude oil through term contracts and the remaining 30 per cent on a spot basis.

This strategy helps these companies diversify their crude supply sources and manage market volatility effectively.

Term contracts involve long-term purchase agreements with fixed volumes and pricing, while spot contracts are immediate purchases from suppliers.