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The renewed tensions between Iran and the US have sent crude oil prices sharply higher, with the Indian crude basket touching the $100 per barrel mark, raising concerns over India’s oil import bill and putting pressure on the financial performance of oil marketing companies (OMCs), according to industry sources and analysts.
The escalation has also heightened concerns over India’s energy supplies from West Asia, as key oil shipping routes in the region face increased attacks and disruption risks.
“There is definitely uncertainty over supplies (from West Asia) but we have alternate supplies which include Russia, Brazil and African countries. At least 1-2 cargoes have been delayed from the region due to fresh attacks but we have secured supplies till September-October,” said a refinery executive on condition of anonymity.
The oil marketing companies are incurring under-recovery on both petrol and diesel with the recent rise in crude oil prices, the executive said. “A call on whether retail fuel prices should be hiked for consumers will not be taken immediately. We will review the situation for a while and then take a call,” he added.
Domestic city gas distribution (CGD) companies have recently raised compressed natural gas (CNG) prices, citing higher input gas costs amid the West Asia crisis and increased reliance on costlier spot regasified liquefied natural gas (LNG) to meet demand. Indraprastha Gas Limited (IGL) raised CNG prices by Rs 3.89 per kg across Delhi-NCR, while Mahanagar Gas Limited (MGL) increased CNG prices by Rs 2 per kg across the Mumbai Metropolitan Region.
Renewed hostilities between the United States and Iran have intensified in recent days, creating concerns over the security of the Strait of Hormuz as traffic through the route has fallen sharply, raising the risk of further disruptions to global energy supplies. Brent crude has risen to around $97 a barrel, near a six-week high, on account of the attacks.
“The renewed hostilities between Iran and US pose a challenge for the limited crude oil supplies coming through the Strait of Hormuz. Owing to these developments, crude oil prices have increased in the past few days and Indian crude basket has crossed the $100 per barrel mark. As a result of the surge in crude prices, marketing margins on auto fuels are likely to turn negative and domestic LPG under recoveries could increase from the current Rs 200 per cylinder,” said Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA.
As on September 4, the Indian crude oil basket stood at $101.07 per barrel.
India’s current account deficit could widen to 1.7 per cent of GDP, or about $71 billion, if crude oil prices stay above $90 a barrel for a significant part of the second half of FY27, as higher oil import costs weigh on the country’s external balances, said equity research firm Motilal Oswal in a note.
Capital inflows are also expected to moderate amid weaker net foreign portfolio investment, resulting in a capital account balance of around $125 billion, or 3.1 per cent of GDP, and a balance of payments surplus of $54 billion, or 1.3 per cent of GDP, it added.
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