Saudi oil pipeline closure adds to crude sourcing worries for Indian oil refiners

SEATTLE (Oil Monster): The closure of the Saudi east–west pipeline is likely to further reduce Indian refiners’ flexibility to source crude at a time when several key oil transit routes are already under pressure, industry experts say.

The pipeline, which allowed Saudi Arabia to bypass the Hormuz Strait and load crude from the Red Sea, came under attack from the Iran-backed Houthi militia. The 1,200-kilometre cross-country pipeline could be out of service for weeks for repair, reports suggested.

Consequently, India is likely lean even more on diversification across Russia, the US, West Africa, Latin America and other non-West Asian sources to reduce exposure to any single corridor, Sumit Ritolia, an analyst with Kpler, said.

With multiple chokepoints facing disruption, Russian barrels routed through the Black Sea and Baltic become more valuable from a supply-security perspective.

“The bigger risk for India is not only physical availability of crude, but the rising landed cost. Higher crude prices, freight, insurance and longer voyages all increase the delivered cost of barrels,” Ritolia observed.

For India, a higher oil import bill would put more pressure on the current account and rupee, and create a greater inflationary risk if elevated energy costs persist while balance sheets of public sector oil marketing companies and the government’s fiscal position could come under stress if retail prices at the pumps are not passed on to consumers.

Russia imported a record 172,000 tonnes of oil products in August, a report by the Centre for Research on Energy and Clean Air (CREA) said.

Courtesy: www.telegraphindia.com