NEW DELHI: The Israel-Iran conflict may not immediately disrupt global oil supplies, but the tensions could keep prices elevated, squeezing oil marketing companies’ margins while having little impact on consumer prices, according to executives at Indian refining firms.
An Israeli strike on Iranian nuclear and military facilities, followed by Iran’s vow to retaliate, sent shockwaves through the oil market on Friday, pushing benchmark Brent crude up 8 per cent to $75 a barrel.
“It is in the interest of the US, Iran, and other West Asian producers to keep oil flowing without disruption,” said a refinery executive, speaking on the condition of anonymity. “Producers in the region will not want their trade disrupted, and Trump will be wary of global supply shocks that could push up US pump prices.”
“India’s crude supply basket is currently well-diversified and West Asia has a comparatively smaller footprint than it was a decade ago,” said M K Surana, the CEO of Ratnagiri Refinery and Petrochemicals Ltd and former chief of HPCL.
Russia currently supplies about 40 per cent of India’s crude imports. “More than supply, it’s the price risk that’s more relevant to India. This can weigh on oil marketing companies’ margins.”
“Structurally, the global oil market supports lower crude oil prices with increased OPEC+ supplies and weak demand growth. But escalating geopolitical tensions brings in risk premium in oil prices, higher freight and insurance costs,” Surana said. “Speculation creates upward momentum in prices.”
Despite the rise in crude prices, domestic fuel rates are unlikely to be affected as pump prices in India are already at elevated levels, said another executive.
