SEATTLE (Oil Monster): Saudi Aramco has reportedly suspended crude oil supplies to Indian refiners until further notice. The decision is expected to further accelerate the challenges faced by domestic refiners in procuring crude, amidst rising global oil prices and supply disruptions.
According to The Economic Times, the decision comes as disruptions affect crude movements from the Gulf. It must be noted that Saudi Arabia has closed the East-West pipeline following an attack, while continuing disruption around the Strait of Hormuz has reduced alternative transportation options.
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Saudi crude has traditionally been an important component of India’s crude imports. Aramco supplied about 9% of India’s crude imports since the conflict began. The reported suspension is feared to disrupt stable supplies for Indian refiners.
The immediate issue for Indian companies could be procurement costs rather than a lack of replacement crude. Brent prices climbed to approximately $108 a barrel on Wednesday and remained above $105, raising the cost of alternative supplies. Freight rates have also increased. The reduced discount rates for Russian crude will weaken alternative sources for cheaper oil imports.
A prolonged disruption could increase refining costs and India’s overall import bill. Consequently, refiners may need to diversify sourcing, adjust their crude blends and compete for spot cargoes.
