Indian Oil Refiners Send Ships to Hormuz to Get Cheaper Oil Amid US-Iran Conflict

Indian oil refiners have begun chartering tankers to traverse the Strait of Hormuz. This marked a significant shift in their approach to secure a more reliable supply chain. This move aims to lower costs and bolster the resilience of their operations.

The change in strategy represents a departure from the traditional approach adopted by Indian refiners since the early stages of the US-Iran conflict. Concerned about the potential for attacks, refiners had previously avoided sending their own vessels through the Strait of Hormuz, opting instead for a more expensive arrangement under cost and freight terms.

However, in recent weeks, Indian Oil Corporation, Reliance Industries Ltd., Bharat Petroleum Corp., and HPCL-Mittal Energy Ltd. have started purchasing Iraqi crude on a free-on-board basis. This move enables refiners to exert greater control over transportation costs, albeit with challenges in securing suitable tankers.

Under FOB transactions, the buyer assumes responsibility for arranging the vessel, loading the crude, and transporting the cargo to its destination. By opting for such deals, Indian refiners can better manage transportation costs, although sourcing and locking in suitable tankers remains a complex task.

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Industry sources indicate that the refiners have floated tenders and are in discussions with shipping companies. Sinokor Group and Dynacom Tankers Management Ltd. have secured tenders, while Shipping Corp.

of India and Lila Global had submitted bids, but their proposals were subsequently cancelled.

The shift in approach follows the recovery of oil flows through the Strait of Hormuz. This has increased to 98% of pre-war levels, according to a note from JPMorgan Chase & Co. The restoration of Saudi Arabia's East-West pipeline has also contributed to this resurgence.

The pricing of Iraqi crude may also be a factor in the refiners' decision to alter their strategy. SOMO, Iraq's state-owned oil marketing company, has been offering contracted supplies for October at discounts of up to $37 a barrel compared to regional benchmarks.

Data from Kpler shows that crude volumes travelling through the Strait of Hormuz to India averaged around 1.3 million barrels a day in September. The highest level recorded since February, before the war began. Overall, India's crude imports from the Middle East stand at approximately 2.8 million barrels a day.

This includes Saudi oil shipped through the Red Sea.

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The move is seen as a strategic response to the changing dynamics of the global oil market. With Indian refiners seeking to optimize their operations and reduce costs in the face of increasing competition and volatility.

The shift in Indian oil refiners' approach has significant implications for the country's energy sector. With potential benefits for consumers and the environment.

As the global energy landscape continues to evolve, Indian refiners must shows of the oil market to ensure a stable and reliable supply of crude oil.

The success of this strategy will depend on various factors. This includes the ability to secure suitable tankers and negotiate favorable prices for crude oil.