Indian Oil Firms Face 40% Surge In Crude Costs As Middle East Disruptions Tighten Supply

Indian oil marketing companies are facing a sharp increase in crude procurement costs as disruptions across key Middle East supply routes reduce the availability of physical barrels and raise the price of replacement shipments.

As per a report by NDTV Profit, aome refiners are now paying 35-40% more than they were around six weeks ago, with crude purchase costs rising to nearly $120-$130 per barrel compared with Brent prices of around $105-$109.

In certain cases, prompt cargoes have reportedly been bought at prices as high as $150 per barrel due to intense competition for immediate supplies.

Saudi pipeline disruption adds to supply pressure

The shutdown of Saudi Arabia’s East-West pipeline has added to market concerns. The 1,200-kilometre pipeline connects the kingdom’s eastern oil fields with the Red Sea port of Yanbu and has a capacity of around five million barrels per day.

Although the outage does not necessarily remove the same volume of crude from global markets, it limits Saudi Arabia’s ability to transport oil through alternative routes. The disruption could increase dependence on the Strait of Hormuz, where shipping activity has already faced severe challenges.

For Indian refiners, the main issue is the rising cost of securing replacement barrels rather than an immediate crude shortage. Saudi Arabia accounted for about 315,000 barrels per day of India’s crude imports in August, compared with total imports of nearly 4.7 million barrels per day.

Alternative supplies become costlier for refiners

Indian companies are increasingly 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 as physical markets tighten.

"Every trader is asking for a premium.. We are now paying at least 35%-40% more than benchmark rates," a refinery executive said in the report.

Russian crude remains a key source for India, with analysts noting its importance amid multiple supply disruptions. However, longer shipping routes from the Americas and West Africa are increasing freight and insurance expenses.

The pressure comes as global oil inventories have declined significantly, with the International Energy Agency estimating a fall of about 507 million barrels since the start of the conflict.