India cuts weight of Dubai and Oman in oil basket as oil sources change | Today’s news
New Delhi: India has reshuffled its oil import mix after disruptions to West Asian crude supplies during the Iran conflict, so that Brent-linked crude has a higher weighting than Dubai-Oman sour crude for the first time in available PPAC data series since 2001, after remaking its official oil basket.
The share of Dubai-Oman sour crude in India’s oil basket fell to 20.60%, the lowest since comparable data became available in 2001, according to Petroleum Planning and Analysis Cell (PPAC) data. Brent sweet now makes up 79.40% of the basket, up from 71.02% in June, 70% in May and 61.02% in April, according to PPAC data.
West Asia’s share of Indian oil imports fell to around 22% in June, from 60-70% before the Iran conflict, as refiners replaced disrupted West Asian supplies with Russian, US, Venezuelan and West African barrels, according to Kpler data.
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The Indian crude oil basket is a price benchmark that generally represents the acquisition cost of oil refineries. It has no significant effect on fuel prices or supply contracts. Although India now imports crude from around 41 countries, the basket includes only globally traded benchmarks Brent and Dubai-Oman. Russian oil – the country’s biggest source of imports – is excluded because it is not traded on exchanges.
The composition of the basket is usually revised annually based on the pattern of imports in the previous year.
Before the Iran conflict, Dubai-Oman oil made up roughly 70% of the basket. The latest revisions reflect refiners’ growing reliance on Russian, Venezuelan and West African barrels after supplies to West Asia were cut following the closure of the Strait of Hormuz amid the US-Iran war.
A developing market
The change comes as Gulf producers face tougher competition in Asia.
A recent HSBC report said Asian buyers, particularly India, Japan and South Korea, had sharply increased purchases from the US Gulf Coast and other Atlantic producers, including South America, to replace disrupted supplies from West Asia.
Mint earlier, citing data from Kpler, said India’s Russian crude imports averaged 2.66 million barrels per day between June 1 and 19, roughly half of the country’s total crude imports during the period.
Russia’s share rose to 51%, while imports from West Africa and South America also saw increases, offsetting a decline in supplies from West Asia.
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“Following the decline in March, India’s crude imports have largely returned to pre-conflict levels as refiners replaced supplies to the Middle East (West Asia) with alternatives from Russia, the US, Oman, West Africa and South America. Russian crude trades at a small discount to Brent, making it attractive to Indian refiners,” the HSBC report said.
The report added that the availability of Russian crude has increased in recent weeks as Ukrainian attacks on Russian refineries have reduced domestic processing, making more oil available for export.
India’s crude oil basket averaged $68.08 a barrel in July, down from the pre-war level of $69.01 in February, according to PPAC data. It climbed to $157.04 a barrel on March 23 due to supply constraints following the closure of the Strait of Hormuz and a sharp rise in global oil prices.
Meanwhile, Saudi Aramco, the world’s biggest oil producer, cut the official selling price of oil sold to Asia by $11 a barrel for August after the Strait of Hormuz reopened and eased supply concerns.
Refineries are adapting
Indian refineries are constantly expanding their ability to process a wider range of feedstocks, giving them greater flexibility in responding to supply disruptions.
A state refinery official said, “It depends on the complexity of the refineries. The newer refineries are more complex, with the recently opened Barmer HPCL refinery being the most complex in the country. Such complex refineries can accept any variant of crude oil. When the automobile sector moved from BS-IV to BS-VI, most of the refineries were recalibrated to handle most such crudes like Venezuelan crude.”
India made a nationwide transition from BS-IV to BS-VI emission norms in 2020 after deciding to skip the BS-V transition phase in 2016 and align vehicle emissions with Euro 6 norms.
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S&P Global Energy recently said the conflict in West Asia underscored India’s need to further diversify oil import routes and build deeper strategic storage and storage reserves.
Manas Majumdar, head of the oil and gas sector at PwC India, said India has diversified its oil sources considerably, with imports now coming from more than 40 sources.
However, he warned that the refinery will have to reckon with the long-term impact of processing a wider range of crude oil types. “In the short term, significant diversification emphasizes supply chain management and managing the changing costs of shipping and insurance,” he added.
Inquiries emailed to Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd did not receive an immediate response.
