Reviewing global oil supplies, have enough stocks: Minister
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Reviewing global oil supplies, have enough stocks: Minister
India is reviewing the global oil supply situation and the emerging tensions between Israel and Iran on a daily basis. The country relies heavily on imports of crude oil for as much as 88% of its requirements. Iran on Saturday launched ballistic missiles at Israel’s Haifa port and nearby oil refinery. Any further escalation of the conflict could result in an increase in crude prices with potential supply disruptions for India. The government had also earlier said that the rising geopolitical tensions in different regions across the world has contributed to increased freight rates and has disrupted energy trade. India’s export of petroleum products in May bounced back to 1.34 million barrels per day, up 31% from 1.02 mbd in April.
The latest conflict between Iran and Israel has once again posed a threat to India’s energy supplies, exposing it to price shocks given its heavy reliance on crude oil imports – much of it through the vulnerable Strait of Hormuz.
While the country does not directly import Iranian crude oil, any disruption in the Middle East could hamper the flow of energy trade with potential increase in freight and insurance cost, experts believe.
Official sources who did not wish to be identified told FE that the country is well prepared to protect its interest and closing the Strait of Hormuz route is not in anyone’s interest as over 22% of global energy trade happens through the channel.
Following the conflict, crude oil prices spiked on Friday with Brent hitting up to $78 per barrel. On Monday, crude oil prices were hovering around $73-74 per barrel.
Any further escalation of the conflict could result in an increase in crude prices with potential supply disruptions for India. The country relies heavily on imports of crude oil for as much as 88% of its requirements and almost 50% of its natural gas consumption, a large portion of which comes from the Middle East. Iran on Saturday launched ballistic missiles at Israel’s Haifa port and nearby oil refinery.
A rise in prices of crude oil and gas would impact the demand and profitability of the downstream companies, analysts say. In the past, Iran has warned of blocking the route which could potentially hurt oil flows.
“As 20% of world oil and LNG trade happens through Strait of Hormuz, which Iran straddles, therefore escalation of conflict could have supply shocks for both these commodities. As loading ports are on the Strait of Hormuz with no alternate arrangements for most of these supplies, the risk is high in case the conflict escalates,” Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, Icra had told FE.
Iran holds about 9% of the world’s oil reserves, and any disruption could impact several key Indian sectors, including oil marketing companies (such as BPCL, HPCL, and IOC), paints (like Asian Paints and Berger Paints), as well as the automobile and cement industries, noted Naveen Vyas, Senior Vice President, Anand Rathi Global Finance.
The government had also earlier said that the rising geopolitical tensions in different regions across the world has contributed to increased freight rates and has disrupted energy trade. Indian exports of petroleum products which have rebounded in May could again face risk if the situation escalates.
India’s export of petroleum products in May bounced back to 1.34 million barrels per day, up 31% from 1.02 mbd in April, according to data from global real-time data and analytics provider Kpler.
In recent years, more than 50% of India’s crude oil imports have originated from the Middle East, as per industry experts. However, in 2023, nearly 40% of its crude oil requirements were met by imports from Russia alone.