Indian Crude Basket Hits Record High Amid Global Oil Market Volatility
Crude oil prices are experiencing wild fluctuations in the international market, reaching a high of $108 earlier this week. The Brent rate is now hovering around $105/bbl as tensions between the US and Iran continue for the sixth month.
The Indian Crude Oil Basket (ICB) is trading at $120.8/bbl, significantly higher than the international futures prices. This discrepancy arises from the difference between physical oil costs and the cost of crude for a particular delivery month in the futures market.
Experts attribute the high ICB price to various factors such as the crude mix India imports, higher Dubai-Oman prices, increased freight and insurance costs, supply concerns in West Asia, and disruptions around the Strait of Hormuz. The US-Iran imbroglio is also affecting global oil supplies, causing a shortage in crude availability.
Analysts predict that if pipeline repairs are delayed and conditions within the Strait of Hormuz remain constrained throughout October, the domestic basket may move even higher to as much as the $130-145/bbl. In a severe case scenario, the East-West pipeline being nonfunctional could cause the Indian crude basket to temporarily test the $150-160/bbl level.