Impact of Middle East Conflict: Indian Refiners Face Premium Oil Prices as Russian Discounts Disappear
Indian refiners are currently facing high premiums for crude oil, a stark contrast to the previous weeks when global oil prices were on the decline. The cost of crude for Indian refiners is rising faster than global benchmarks due to tighter physical supplies, particularly from the Gulf and West Africa. Brent futures have surged by approximately $10 a barrel over the past two weeks, surpassing $91 a barrel on Tuesday.
Physical crude markets under pressure
The physical crude markets are experiencing increased pressure, enhancing the bargaining power of suppliers. Indian refiners are increasingly resorting to costly spot purchases to secure Gulf supplies. A refinery executive noted that Gulf suppliers are demanding premiums of $3-4 a barrel over the Dubai-Oman benchmark, which itself is priced at a premium of $6-7 a barrel to Brent. Consequently, the effective price of Gulf crude for Indian refiners is around $10 a barrel higher than Brent.
Saudi Aramco’s official selling prices for various crude grades offer limited relief, as they remain $1.5-3 a barrel below Dubai-Oman. Disruptions in the Red Sea and the Strait of Hormuz have diminished the availability of crude under term contracts. As a result, Indian refiners are increasingly dependent on the spot market, where traders, including those from Gulf national oil companies, are demanding higher premiums. These traders are taking on greater risks to transport cargoes through conflict-affected waterways, which is reflected in the premiums being sought.
Russian crude still in focus
Despite the shifting market dynamics, Russian crude remains a key source for deliveries through September. This situation contrasts sharply with early July when Brent spot prices fell below $70 a barrel due to a temporary US-Iran truce. The influx of crude from the Persian Gulf at that time alleviated supply concerns. However, Brent prices have since risen above $93 a barrel.
The discounts on Russian and Venezuelan oil that were available during the truce have largely disappeared. The recent end of the 60-day truce could further complicate crude procurement for Indian refiners, especially if the US tightens sanctions on buyers of Russian oil. Recent legislation passed by the US Senate aims to impose tariffs of up to 100% on countries like India and China purchasing Russian crude, which could exacerbate global supply pressures and elevate oil prices.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
