Indian Crude Basket Reflects Shifts in Global Oil Markets Amid West Asian Crisis

India's crude procurement strategy has become increasingly diversified as the West Asian crisis continues to disrupt global oil supplies. To track crude costs and inflation risks, policymakers and companies rely on the Indian Crude Basket (ICB), a benchmark price index that combines two international price references: Dated Brent for sweet crude and Dubai/Oman for sour crude.

The ICB's mix shifts as refiners adjust their procurement based on factors like price, availability, crude quality, freight costs, geopolitical risks, and security of supply. For instance, in April the basket's ratio was 61.02:38.98 (sweet:sour), but by July it had changed to 79.40:20.60. This shift indicates a higher proportion of sweet crude imports, making Brent-linked pricing more influential.

It is essential to note that the ICB is not the actual invoice paid by refiners; rather, it serves as a benchmark. Refineries buy individual crude grades through long-term contracts or spot purchases, which can trade at discounts or premiums to their benchmark prices. When there's a West Asia crisis, oil markets fear disruption to supplies, causing crude prices to rise. This may lead refiners to adjust their procurement strategies, altering the ICB's composition and determining whether Brent or Dubai/Oman has greater influence on its movement.