OPEC's Output Curbs Squeeze World's Biggest Oil Refining Complex
(Bloomberg) -- Being sophisticated in the age of OPEC output curbs can prove a disadvantage, as the operator of the world’s biggest oil-refining complex is discovering.
Reliance Industries Ltd.’s 1.24 million barrel-a-day facility in western India features highly advanced units designed to process the globe’s heaviest types of crude, which have historically been cheaper than lighter varieties because they are more difficult to break down into fuels. Now, a drive by the Organization of Petroleum Exporting Countries to stabilize the oil market is squeezing supplies of such grades and making them relatively costlier.
The result: Billionaire Mukesh Ambani’s company posted quarterly profit that lagged behind estimates for the first time in more than two years. Reliance earned $12 for every barrel of crude it turned into fuel in the second quarter ended Sept. 30, compared with a prediction by CLSA India Pvt. for as much as $12.80 a barrel.
Shares of the company were down 0.7 percent on Monday at 12:28 p.m. in Mumbai, compared with a 0.3 percent gain in the broader S&P BSE Sensex Index.
Refining margins fell below expectations as OPEC’s curbs led to the lower availability of cheaper grades of crude, according to Srikanth Venkatachari, Reliance’s joint chief financial officer. “There is nothing which suggests that suddenly supply of heavy crude has eased, so this condition will persist.”
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