New Delhi: Indian refiners got some breathing room on Monday after crude prices tumbled more than 9%, slipping below $90 a barrel as the US and Iran paused strikes over the weekend following two weeks of attacks. The decline eases immediate concerns over India’s oil import bill, although traders and analysts caution that supply risks across key shipping routes remain unresolved.
Brent crude for September delivery fell to an intra-day low of $87.64 a barrel. By around 5.15pm, the September Brent contract on the Intercontinental Exchange was trading at $89.21, down 7.57% from its previous close. The September West Texas Intermediate contract on the New York Mercantile Exchange (Nymex) was at $83.17 a barrel, down 6.87%.
The price decline reflected signs of a temporary de-escalation in the conflict, with no attacks reported by either side for the third straight day on Monday. A Reuters report, citing an Iranian official, said Iran would halt its attacks as long as the US does the same.
After 13 nights of intensifying US airstrikes on Iran, Washington suspended the strikes on Friday. Iran subsequently halted attacks on neighbouring countries hosting US military bases.
Mike Waltz, the US ambassador to the United Nations, told the media that the US president decided to pause attacks to allow more time for diplomacy. “He’s giving talks some space, he’s giving it a little bit of room,” Waltz said.
Markets also drew comfort from Russian deputy prime minister Alexander Novak’s statement on Saturday that restrictions on diesel sales from the country would be lifted, helping prevent surplus build-up at Russian refineries.
Relief, not resolution
Lower crude prices are positive for India, which imports nearly 90% of its crude oil requirement.
Ponmudi R., chief executive officer of Enrich Money, said, “Crude oil prices have retreated sharply from their recent highs easing concerns over global inflation and providing a favourable backdrop for major oil-importing economies such as India.”
The conflict has already raised concerns over inflation and higher import costs. A sustained $1 increase in crude prices over a year could add ₹18,000 crore to India’s import bill. The country’s annual oil import bill of around $120 billion accounts for 17-25% of overall merchandise imports.
India’s crude oil import bill for April-June has already reached $49.8 billion, up 61% year-on-year on elevated global prices, accounting for 40% of the previous fiscal year’s total oil import bill.
The recent relief in prices, however, has not eliminated concerns over physical supplies.
On Monday, Iran said it remained in control of the Strait of Hormuz and was not seeking to resume peace talks with the US. Disruptions in the Red Sea caused by Yemen’s Houthi militia also continue to threaten oil flows from Saudi Arabia, posing risks for major importers including India.
The Red Sea route now accounts for about 14% of India’s oil imports, having become the primary route for Saudi crude, while before the conflict the Strait of Hormuz handled about 65% of India’s imports.
In a newsletter on Monday, the International Energy Agency (IEA) it “…is closely monitoring the situation in oil markets following recent developments in the conflict in the Middle East—with the escalation in hostilities affecting the Strait of Hormuz and energy infrastructure in the region increasing security of supply concerns and casting greater uncertainty over the market outlook. Threats to the Bab el-Mandeb Strait, an increasingly important alternative shipping route for bypassing Hormuz, are adding to those concerns.”
Posting on X, Sumit Ritolia, senior manager, modelling at commodities and maritime tracking firm Kpler, said Saudi crude loadings have fallen by about half following Houthi attacks on Saudi-linked shipping, although the corridor remains open. “Saudi crude exports through Bab el-Mandeb remain ongoing despite a marked decline in transit volumes following Houthi attacks,” he said.
India also faces risks from slowing Russian crude exports after Ukrainian attacks on the Novorossiysk export terminal. While refiners do not expect an immediate supply disruption, a prolonged outage could squeeze India’s access to discounted Russian crude, particularly as price discounts have already narrowed.
According to Kpler, crude exports from the Novorossiysk port have dried up since 20 July.
Refiners and traders do not expect an outright supply shock, but they warn that slower deliveries, higher freight costs and shrinking discounts on Russian crude could still inflate India’s oil import bill, especially with the rupee remaining weak against the US dollar.
