Middle East Disruptions Send Indian Oil Costs Soaring
Indian oil marketing companies are facing a significant surge in crude procurement costs due to disruptions in key Middle East supply routes. The cost of securing replacement barrels has increased by 35-40% compared to six weeks ago, with prices rising to $120-$130 per barrel from Brent's $105-$109.
The shutdown of Saudi Arabia's East-West pipeline, which connects the kingdom's eastern oil fields with the Red Sea port of Yanbu, has added to market concerns. Although the outage doesn't remove a significant volume of crude from global markets, it limits Saudi Arabia's ability to transport oil through alternative routes, increasing dependence on the Strait of Hormuz.
Indian companies are relying on supplies from Russia, the US, Brazil, Guyana, West Africa, Iraq, and the UAE as competition for available barrels increases. Traders are charging higher premiums, with one refinery executive noting that 'every trader is asking for a premium' and they're now paying at least 35%-40% more than benchmark rates.