India cuts Dubai-Oman weight in crude basket as oil sourcing shifts

New Delhi: India has flipped the composition of its official crude basket after disruptions to West Asian oil supplies during the Iran conflict reshaped its crude import mix, giving Brent-linked crude a higher weight than Dubai-Oman sour crude for the first time in the available PPAC data series since 2001.

The share of Dubai-Oman sour crude in the Indian crude basket has been cut to 20.60%, the lowest since comparable data became available in 2001, according to data from the Petroleum Planning and Analysis Cell (PPAC). Brent-linked sweet crude now accounts for 79.40% of the basket, up from 71.02% in June, 70% in May and 61.02% in April, according to PPAC data.

West Asia's share in India's crude imports fell to around 22% in June, according to Kpler data, down from 60-70% before the Iran conflict, as refiners replaced disrupted West Asian supplies with Russian, US, Venezuelan and West African barrels.

The Indian crude basket is a pricing benchmark that broadly represents refiners' crude procurement costs. It does not materially affect fuel pricing or supply contracts. Although India now imports oil from about 41 countries, the basket comprises only the globally traded Brent and Dubai-Oman benchmarks. Russian crude—the country's largest import source—is excluded because it is not traded on exchanges.

The basket's composition is typically revised annually based on the previous year's import pattern.

Before the Iran conflict, Dubai-Oman crude accounted for roughly 70% of the basket. The latest revision reflects refiners' growing reliance on Russian, Venezuelan and West African barrels after disruptions to West Asian supplies following the closure of the Strait of Hormuz amid the US-Iran war.

Evolving market

The change comes as Gulf producers face stiffer competition in Asia.

A recent HSBC report said Asian buyers, particularly India, Japan and South Korea, have sharply increased purchases from the US Gulf Coast and other Atlantic Basin producers, including South America, as substitutes for disrupted West Asian supplies.

Mint earlier reported, citing Kpler data, that India's Russian crude imports averaged 2.66 million barrels a day between 1 and 19 June, accounting for roughly half of the country's total crude imports during the period.

Russia's share rose to 51%, while imports from West Africa and South America have also witnessed an increase, offsetting the decline in West Asian supplies.

“After a dip in March, Indian crude imports have broadly returned to pre-conflict levels as refiners replaced Middle East (West Asia) supplies with alternatives from Russia, the US, Oman, West Africa and South America. Russian oil is trading at a small discount to Brent, making it attractive to Indian refiners,” the HSBC report said.

The report added that Russian crude availability has increased in recent weeks as Ukrainian attacks on Russian refineries curbed domestic processing, leaving more crude available for export.

India's crude basket averaged $68.08 a barrel in July, below the pre-war level of $69.01 in February, according to PPAC data. On 23 March, it had climbed to $157.04 a barrel amid supply constraints after the closure of the Strait of Hormuz and surge in global oil prices.

Meanwhile, Saudi Aramco, the world's largest oil producer, cut its official selling price for crude sold to Asia by $11 a barrel for August, following the reopening of the Strait of Hormuz and the easing of supply concerns.

Refineries adapt

India's refiners have steadily expanded their ability to process a wider range of crude grades, giving them greater flexibility to respond to supply disruptions.

An official with a state-owned refinery said, "It depends upon the complexity of the refineries. Newer refineries are more complex, with the recently inaugurated Barmer refinery of HPCL being the most complex in the country. Such complex refineries can take any variant of crude. When the automotive sector moved from BS-IV to BS-VI most of the refineries were recalibrated to process most kinds of crude including heavy crudes such as oil coming from Venezuela."

India made the nationwide transition from BS-IV to BS-VI emission standards in 2020 after deciding in 2016 to skip the intermediate BS-V stage and align vehicle emissions with Euro 6 standards.

S&P Global Energy recently said the West Asia conflict underscored India's need to further diversify crude import routes and build deeper strategic storage and inventory buffers.

Manas Majumdar, leader, oil and gas sector at PwC India, said India has diversified its crude sourcing considerably, with imports now coming from more than 40 sources.

He cautioned, however, that refiners would have to account for the long-term impact of processing a wider variety of crude grades. “In the short term, significant diversification puts stress on supply chain management and managing varying shipping and insurance costs,” he added.

Queries emailed to Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd did not receive an immediate response.