New Delhi: Bharat Petroleum Corporation Limited (BPCL) bought close to 69 percent of its crude on the spot market in the first quarter of 2026-27, up from 44 percent in the same quarter a year earlier, as the West Asia conflict disrupted its contracted term supplies, the company told analysts in its Q1 earnings call on July 23.
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"Due to disruptions in tied up term crude volumes, we proactively optimised our crude sourcing by significantly increasing spot crude purchases with the spot percentage rising to almost 69 percent in quarter 1 FY27 from 44 percent in the corresponding previous year," said Director (Finance) VRK Gupta.
To secure barrels, BPCL widened its sourcing map. "We diversified our crude sourcing outside of the Strait of Hormuz, exploring multiple geographies, including increasing the Russian crude grades to 38 percent of our total procurement during this quarter. We also procured two new crude grades from Venezuela and Angola," Gupta said. He described Venezuelan crude as an opportunistic monthly buy rather than a term arrangement, noting the refineries "cannot take it directly. We have to take a blend and do it," and that inconsistent commercial offers meant BPCL was "not in a position to take any term contracts for a continuity."
Gupta said the strategy was executed "by overcoming multiple hurdles, including vessel availability, placement of freight, insurance, etcetera," adding that BPCL had "already tied up our August volumes and (is) in the process of sourcing for September 2026, providing (the company) with adequate availability even as the geopolitical situation remains fluid."
The discount that has underpinned Russian crude economics has evaporated. Gupta said BPCL had concluded its Russian Urals deals through August, but the pricing advantage was gone. "based on the recent development in the crude market, now no one is offering any discount for Russian crude," he said. As recently as early July, he noted, the company had still captured "a good amount of discounts of USD 3-4 discounts of Russian Urals."
Gupta repeatedly steered analysts away from the headline crude price toward the landing premium, which he said was where the conflict was actually being paid for. The gap between BPCL's landing cost and the benchmark had widened from "USD 4 to 5" before the war to "USD 13 to 15" afterwards, and to "more than USD 15" for the April-June quarter.
"This particular benchmark and landing, the difference is on account of three major components. One is the freight definitely. Second is the insurance. The third one is premium what you pay to the supplier," Gupta said. Premiums on some cargoes had "gone up beyond USD 10," against a pre-war norm where cargoes were available "at benchmark level without having any premiums or sometimes it may be a USD 0.5 or USD 1 discount." On shipping, he said war-scale freight rates that hovered at "USD 55 to USD 60" before the conflict had spiked to a "peak level of USD 600" before easing to "around USD 380 to 400."
Gupta said BPCL was maintaining around 30 days of crude cover and had concluded contracts for July and August, but visibility ran out beyond September, with Red Sea shipping risk live. "Based on the recent issues in terms of this Red Sea route, there may be certain issues in terms of a couple of cargoes. So maybe we may not take the cargoes, or they may not be in a position to supply," he said. "Beyond September, we have not started any contracting on the spot volumes. We have to wait and see some more time."
The conflict also reshaped BPCL's product slate. Gupta said the company ran no output at its propylene derivative petrochemical project (PDPP) during the quarter, diverting the entire feedstock stream to cooking gas. "Thanks to the war, we have not started any of the production during this quarter, PDPP. Whatever stream available entire stream we have shifted to LPG production. So, there is no production of PDPP during this quarter. So, there is no profit, there is no production, PDPP," he said.
Even with that diversion, domestic LPG volumes fell. "We have seen the LPG domestic degrowth in Q1, significant degrowth. It's a double-digit, almost 14 percent or 15 percent degrowth," Gupta said, adding the main reason was "a little bit shortage of the supply." On per-cylinder economics, he said that using the July Saudi contract price as a base, "the per cylinder is INR490," while the August contract price "announced by Saudi, it is USD 592." The cumulative LPG compensation buffer owed by the government stood at "INR15,804 crores as on 30th June," he said, expressing hope of continued support while flagging that "timing is the issue when we will get the money."
BPCL's gas business took a parallel hit. "Despite force majeure under 2 major LNG long-term contracts, we ensured uninterrupted supply to all our bulk, CNG and PNG customers by procuring from the spot markets," Gupta said.
Aviation turbine fuel (ATF) was another pressure point. Gupta said international ATF sales had fully passed on costs but the domestic segment was in loss, and a government market stabilisation fund had found no takers. "Government has introduced a market stabilisation fund. But unfortunately, no airline players have come forward and they signed the MOU," he said. BPCL had revised domestic ATF prices in phases: "In the loss revision, INR115 we have increased. And next, since the prices have come down, again, we have reduced to INR110." He put BPCL's ATF split at "roughly 55 percent to 60 percent international and 40 percent to 45% percent domestic," and said domestic losses had not been separately quantified. "April, May, June, we have not passed on the full price cost to the market. There will be some losses," he told analysts.
On fuel retailing, Gupta said elevated international product prices had produced adverse marketing margins for much of the quarter, prompting a pump-price increase. The company "undertook calibrated retail price revision of approximately INR7.5 per liter across motor spirit and high-speed diesel, which helped mitigate the marketing losses to some extent," he said.
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Gupta expected the dislocation to prove temporary, arguing the global crude market was oversupplied. "still crude is surplus. I think 2 million barrel per day it's surplus," he said, adding that prices "had to come down to USD 80." He tied the remaining uncertainty to the conflict: "This war situation says sometimes Strait of Hormuz issues, sometimes Red Sea issues. Let us see these things should resolve maybe another 1 month or 1.5 months, we'll see the stable markets (sic)."
