Key facts
- Indian refiners are seeking tankers to carry oil from the Persian Gulf via the Strait of Hormuz.
- Heightened risk of attacks in the Strait of Hormuz had previously deterred refiners from using Indian tankers.
- Three tankers were attacked in the Strait of Hormuz this week.
- Iraq is offering discounts of up to 37% on its crude for October loading.
- India's average daily intake of Middle Eastern oil was 3 million barrels in September.
- Imports of Russian crude declined following U.S. tariff threats.
Indian refining companies are actively seeking tankers to transport crude oil from the Persian Gulf through the Strait of Hormuz, a significant shift from their previous reluctance due to elevated security risks. This change in strategy is reportedly driven by cost considerations, including attractive discounts offered by Iraq on its crude oil.
Until recently, Indian refiners avoided using their own tankers for Middle Eastern routes, opting instead for services from Gulf state producers and international energy majors. This approach came with a premium on crude prices and significantly higher freight and insurance costs, especially after recent attacks on tankers in the Strait of Hormuz. This week alone saw three tankers attacked in the vital waterway, according to the UK Maritime Trade Operations outlet.
The decision to switch to free-on-board cargoes, where the buyer arranges transportation, is likely motivated by Iraq's substantial discounts, which can be as high as 37% on its crude for October loading. This makes the cost-effective option of using local tankers more appealing, particularly as Iraq's state oil marketer, SOMO, has limited alternatives to the Hormuz route.
India's overall intake of Middle Eastern oil has increased, averaging 3 million barrels per day in September, according to Kpler estimates. This comes as imports of Russian crude have seen a decline following U.S. threats of substantial tariffs on Indian imports if the country continued to purchase Russian oil, though Russia remains India's largest single oil supplier.