Indian state-owned refiners are rushing to procure spot crude unusually far in advance as Ukrainian attacks on Russian energy assets and a stalemate over the Strait of Hormuz make supplies increasingly uncertain, according to a Bloomberg report published by The Hindu BusinessLine.
Refiners break from spot-buying convention
Processors, including Indian Oil Corp. and Hindustan Petroleum Corp., have already tied up some supplies until October and are now seeking cargoes for as far ahead as November, people familiar with the matter told Bloomberg. Typically, these companies buy spot supplies just a month or two in advance.
Typically, these companies buy spot supplies just a month or two in advance.
The buying spree by the world’s third biggest oil importer underscores mounting concerns over supplies from Russia, which have plunged to the lowest since May after a wave of Ukrainian attacks on the country’s energy and ports infrastructure, Bloomberg reported. Russia has become India’s biggest crude supplier in recent years, accounting for about half of purchases by state-run refiners.
State refiners in the South Asian nation meet about half their crude needs through term contracts, according to the report. They rarely need to commit orders for spot cargoes more than two months ahead given their proximity to major producers in the Middle East and Africa. Also, while Russian crude originates far away, sanctions have left a pool near India available at short notice.
October cargoes locked in early
Hindustan Petroleum Corp. bought about 4 million Middle Eastern barrels for October delivery that don’t require passage through the Strait of Hormuz, while Mangalore Refinery & Petrochemicals Ltd. booked West African oil arriving in the same month, the people said. The country’s biggest refiner, Indian Oil, is also out to buy October supplies.
Indian companies are preparing to issue more tenders in the coming weeks after having bought some October cargoes, and some volumes for November delivery have also been ordered, according to the people, who asked not to be named due to the sensitivity of the matter. Spokespeople for Indian Oil, HPCL, MRPL and Bharat Petroleum Corp. didn’t immediately respond to requests for comment.
Supply-side shocks: Russia and Hormuz
Middle Eastern oil exports remain well below normal as peace talks between the US and Iran are deadlocked and a full reopening of the Strait of Hormuz is uncertain, Bloomberg said. Hardening positions in Washington and Tehran have dimmed hopes for a breakthrough, while Iran’s attacks on two UAE ships on Friday may further cloud prospects.
| Key metric | Figure |
|---|---|
| HPCL Middle Eastern cargoes bought for October | Around 4 million barrels |
| Russian share of state-run refiner purchases | About half |
| Additional Indian refining capacity due this year | More than 500,000 barrels per day |
| Typical spot procurement lead time | One to two months |
| Supplies already tied up | Until October (seeking November) |
US sanctions threat adds urgency
The threat of US sanctions on buyers of Russian oil and gas, including India and China, is also fueling the buying spree, per the report. The Senate last week passed legislation authorizing steep tariffs on major purchasers of Moscow’s energy, though the measures have yet to take effect. India has said the bill is the US’s internal matter.
Festival season and refining expansions lift demand
The new supply headwinds are emerging just as India heads into the stronger demand season with festivals starting in September. Refining expansions that will add more than 500,000 barrels of daily processing capacity this year will also boost requirements, Bloomberg reported.
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