Cheaper Saudi Crude Offers Relief to Indian OMCs Amid Rising LNG Costs

Saudi Aramco's decision to cut crude prices has provided some relief to Indian state-run oil marketing companies (OMCs) as they face elevated transportation costs, according to a sector report by Equirus Securities.

The official selling price (OSP) of Saudi crude was reduced by $2 per barrel in September, marking the lowest level since June 2020. This move is seen as an effort by the kingdom to defend its market share and stay competitive with other Gulf suppliers.

For Indian OMCs such as IOCL, BPCL, and HPCL, lower OSP delivers crucial cost relief at a time when conflict-driven freight and insurance costs had jumped by $9 to $10 per barrel. Although Saudi Arabia accounted for approximately 8-9% of India's crude imports in July, the broader financial advantage could expand if competing Middle Eastern producers lower their selling prices as well.

However, on the gas side, Equirus Securities noted that higher LNG prices will 'start to bite from September' as the momentum from front-loaded deliveries begins to fade. Asian spot LNG prices have surged 40% from $16 per mmbtu in early July to $23 per mmbtu by late August.