(FE)
Brent crude briefly flared up early Monday, before settling lower at $76-78, but concerns of potential extreme price volatility refused to wither away, amid escalating West Asian tensions.
While government managers here don’t expect any immediate supply threat to India, analysts warn that any sharp spike in crude prices could have serious implications for the country as a big energy importer.
On Monday, Israel intensified attacks on Iran and the latter vowed to retaliate against US strikes on its nuclear facilities. Tehran’s threat of closing down the Strait of Hormuz has raised concerns over disruption of oil flows globally. India is dependent on the route for most of its crude supplies from the Middle East.
Analysts note that any disruption around the Strait of Hormuz may affect oil shipments coming from Iraq, Saudi Arabia, and the UAE, all key suppliers for India.
Experts expect Brent to “remain upwards of $75/barrel in the near term.” Any further increase in prices could further dampen profitability of India’s downstream oil companies and inflate the country’s import bill.
In April-May this year, India’s crude import bill declined by 16.6% to $22 billion, as prices remained subdued.
Brent surged to a five-month high of $81.4/barrel Monday morning, before stabilising. WTI crude also rose to $78.4/barrel, but later stablised around $74, as against $60 before the Israel-Iran conflict.
According to Kpler’s, 1.73 Mbd (million barrels per day) of India’s crude oil imports were routed via the Strait of Hormuz in June. The 3-month moving average (March–May) for these flows stands slightly higher at 1.83 mbd, or 39% of India’s total crude intake in that period.
“This underscores the strategic vulnerability India faces should this chokepoint become compromised. There is no doubt that the Strait of Hormuz remains a critical artery for India’s crude oil imports and broader economic stability, especially as crude prices are closely linked to the GDP and inflationary dynamics,” said Sumit Ritolia, Lead Research Analyst, Refining & Modeling at Kpler.
