Gulf oil rebounds as India faces Russian supply competition and US sanctions

Saudi Arabia’s state oil company, Aramco, has cut its flagship crude price for Asian buyers by $5 per barrel below the Dubai/Oman benchmark, a move aimed at compensating buyers for the high costs and risks of transporting oil through the Gulf. The Wall Street Journal reports that Very Large Crude Carriers (VLCCs) are charging up to $40 million for round trips through the Strait of Hormuz, while crews are earning bonuses of up to $25,000 for these dangerous journeys.

Despite the challenges, oil shipments from the Gulf have rebounded to 80% of pre-war levels, thanks to US naval protection and strikes that disrupted Iranian radar and communications. In September, around 3 million barrels per day (bpd) of Middle Eastern oil reached India, pushing total crude imports to 5.3 million bpd, the highest this year. This resurgence has led to a decline in Russian oil imports to India, which dropped from a peak of 2.65 million bpd in July to 1.75 million bpd in September.

China’s return to the Russian oil market has intensified competition for Russian barrels, particularly the Urals crude that India has relied on heavily. Meanwhile, the US threatens up to 100% sanctions on countries buying Russian energy, putting India and China at risk. For Indian refiners, the situation has created winners like Reliance Industries, which benefits from soaring refining margins, and losers like state-owned refiners forced to absorb rising crude costs without raising fuel prices.