Synopsis
Indian refiners face mounting crude supply disruptions from the Gulf region. Rising vessel attacks and transit bottlenecks are causing significant delivery delays. A tight tanker market further complicates securing necessary crude oil shipments. Refiners may be forced into unplanned refinery run cuts due to these issues. However, domestic fuel supply is not expected to be impacted significantly.
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New Delhi: Crude supply disruptions are mounting for Indian refiners, marked by rising vessel attacks and transit bottlenecks in the Gulf and exacerbated by a tight tanker market, threatening timely deliveries, said people familiar with the matter.
Some refiners are facing delays and cancellations of contracted cargoes from the Gulf, forcing them to scramble for supplies from alternative markets, the people said. But finding vessels remains a major challenge. Also, arranging ships with replacement barrels would take time.
Also read: Oil shipments to India face delivery hurdles on Mideast snarls
Refiners fear they may be forced to make unplanned cuts to refinery runs if the replacement cargoes arrive late, people said. "It is a challenging time for refineries," said one of the persons.
Over Tuesday night, West Asia saw the biggest US bombardment on Iran since July, with Tehran targeting American bases across the region in retaliation. The conflict seems set to escalate, with US Treasury Secretary Scott Bessent warning "everyone" against backing Iran, while the latter threatened Washington with a "new strategy."
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India's crude imports fell 8% sequentially to 4.6 million barrels per day in August, a four-month low, according to Kpler. Some executives attributed the decline in part to vessel delays.
Also read: India’s August fuel story: Petrol, diesel up, LPG down
Plans Disrupted
The operational hurdles are also testing refiners' monthly crude planning cycles.
Refiners blend different grades to create the most technically suitable and economically efficient feedstock before processing it. Companies maintain 10-15 days of inventory at their refineries, and delays in the arrival of specific crude grades due to cargo cancellations or vessel unavailability can cause problems, said the people cited earlier.
However, they emphasised that some unplanned run cuts may not impact overall domestic fuel supply, as refiners also maintain inventories of refined products.
The disruptions are only Gulf-specific, and refiners aren't encountering problems importing crude from suppliers in other regions, the people said.
At the end of August, India's overall crude inventory, including strategic reserves and refinery stocks, stood at about 99 million barrels, according to Kpler. This is equivalent to 18 days of refinery runs at the current processing rate of 5.5 million barrels a day. Excluding strategic reserves, refiners had about 13 days of inventory.
An industry executive explained that the issue isn't a crude supply shortage but rather the growing difficulty of transporting it.
Also read: Pakistan’s LNG dilemma deepens as Middle East energy crisis hits power supply
The tanker market has tightened as global oil trade is being reshuffled. Some vessels remain stuck in the Gulf amid the US-Iran war, while others are taking longer routes to avoid high-risk areas. This keeps ships at sea for longer, reducing the number of vessels available for fresh cargo and inflating freight rates.
Despite the conflict-driven supply challenges, refiners continue to source from the Gulf to avoid the higher cost of importing from other regions such as the US and South America.
Russia remains India's leading crude supplier, with the UAE and Saudi Arabia being the other two significant suppliers. At 2 million barrels per day (bpd) in August, Russia accounted for about 45% of India's total imports. The UAE was the second-largest supplier at about 510,000 bpd, while Venezuela came third at about 350,000 bpd, just ahead of Saudi Arabia's 330 bpd.
