Saudi Aramco Stops Crude Oil Supplies To Indian Refiners, Says Report

Saudi Aramco has stopped supplying crude oil to Indian refiners until further notice, adding to pressure on refiners already dealing with elevated crude prices, higher freight costs and disruptions to traditional supply routes, according to a report by The Economic Times citing people familiar with the matter.

The development comes amid growing disruption to crude flows from the Gulf region. Saudi Arabia’s East-West pipeline has been shut after an attack, limiting the kingdom’s ability to move crude to its western ports and providing fewer alternatives as the Strait of Hormuz remains disrupted.

Saudi crude has been an important source of supplies for Indian refiners. Aramco accounted for around 9% of India’s crude imports since the beginning of the conflict.

The immediate concern for Indian refiners, however, is not necessarily the availability of replacement barrels but the cost at which those barrels can be secured.

Brent crude oil prices surged to around $108 a barrel on Wednesday. It is still trading above $105 a barrel.

Replacement crude could come at a higher cost

Indian refiners can look for alternative supplies from other producers, but replacing Saudi barrels could become more expensive as global oil benchmarks and spot prices remain elevated.

ET reported that refiners are also facing higher tanker freight rates, adding another layer of cost to crude procurement. At the same time, discounts available on Russian crude have narrowed or disappeared, making one of the key alternative sources less attractive on price.

This means refiners may have to source crude from a wider range of suppliers and geographies, potentially increasing their overall procurement costs.

Saudi spot cargoes still reaching the market

The supply halt does not mean Saudi crude has completely disappeared from the market. According to ET, Aramco has continued to sell some crude cargoes in the spot market to traders. Some of these barrels could eventually reach Indian refiners through the Strait of Hormuz.

However, such supplies may not provide the same certainty or pricing advantage as regular term contracts.

What it means for Indian refiners

The disruption comes at a sensitive time for Indian refiners, which depend heavily on imported crude to meet domestic fuel demand and operate their refining systems. Higher crude procurement costs can affect refining margins if refiners are unable to pass the increase through to product prices. Refiners may therefore have to optimise their crude mix, seek supplies from alternative producers and make greater use of available spot cargoes.

The impact will also depend on how long the Saudi supply disruption lasts and how quickly normal crude flows through key Gulf routes resume.

For India, a prolonged disruption could also increase the country’s overall oil import bill if refiners are forced to buy replacement barrels at higher prices.

The latest development adds another layer of uncertainty to an already volatile oil market. Any prolonged disruption to Saudi exports to major Asian buyers could tighten the availability of crude in the region and keep prices and freight rates under pressure.

For Indian refiners, the focus will now be on securing alternative barrels without significantly increasing their crude basket cost.