India's Energy Sector Buckles Under High Oil and LNG Prices

India's energy sector is facing increasing pressure due to high oil and liquefied natural gas (LNG) prices, as well as higher maritime shipping costs. The impact of the war in Iran on global oil and LNG trade flows is exacerbating the situation. According to Equirus, an Indian brokerage firm, while higher refining profits are partly offsetting the negative impact, marketing margins on petrol and diesel fuel sales remain negative.

The high Asian LNG prices are also weighing on gas segment margins, and may lead to a reduction in Indian LNG imports in September after substantial deliveries in August. India's crude oil import bill has risen sharply in recent months due to reduced supplies from the Middle East and risks to shipping in the Strait of Hormuz.

The spot price of LNG in Asia climbed to its highest level since 2022, with a 61% increase compared to last year and a 22% jump above three-month levels. Freight rates on the route from Ras Tanura in Saudi Arabia to India have increased by more than 400% since February 28.

India spent 60% more on oil imports from April through June compared to the same period last year, despite slightly lower import volumes. In July, oil import spending was 41% higher year-on-year.