- Indian oil firms are arranging their own tankers for crude imports via the Strait of Hormuz
- Refiners are buying Iraqi crude on a free-on-board basis, gaining control of freight and transport
- Shipping tenders awarded to Sinokor Group and Dynacom, others like Shipping Corp. of India canceled
Indian oil companies are adopting a new shipping strategy for crude imports, arranging their own tankers to pass through the Strait of Hormuz as improving traffic conditions and cheaper Iraqi crude make direct cargo purchases more economical, according to a report.
Indian Oil Corp., Reliance Industries, Bharat Petroleum Corp. and HPCL-Mittal Energy are seeking tankers for the voyages, with the refiners having floated tenders and entered into discussions with shipping companies, Bloomberg News reported, citing people familiar with the matter.
Sinokor Group and Dynacom Tankers Management have secured contracts under the process, while tenders submitted by Shipping Corp. of India and Lila Global were subsequently cancelled, the report added.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
ALSO READ: Iran-Gulf Meeting To Discuss Strait of Hormuz Postponed, Oman Says
The shift comes after Indian refiners had largely avoided sending their own vessels through Hormuz following the outbreak of the US-Iran conflict because of concerns over possible attacks. Instead, producers in the Gulf and international trading companies handled the shipping and associated risks, with Indian buyers paying higher premiums under cost-and-freight arrangements.
The refiners have recently purchased Iraqi crude on a free-on-board basis, changing that equation. Under FOB contracts, the buyer is responsible for arranging vessels, loading the crude and transporting it to the refinery. While this creates additional logistical challenges, it also gives refiners greater control over freight costs and cargo movements.
The strategy has become more viable as oil flows through Hormuz have recovered. Shipments of Middle Eastern crude are now estimated at about 98% of pre-war levels, according to a recent JPMorgan Chase & Co. note. Saudi Arabia has also restored operations of its East-West pipeline, providing an alternative route for some crude exports.
ALSO READ: Trump Demands Countries 'Reimburse' US For Keeping Oil Flowing Through Hormuz
India's refiners are simultaneously facing changing economics around Russian oil, with growing US political pressure making some buyers more cautious about taking Russian cargoes. Indian vessels travelling through Hormuz had previously faced restrictions linked to crew deployment.
In August, however, the Directorate General of Shipping eased its advisory, asking shipowners and placement agencies to obtain the consent of Indian seafarers before sending vessels through the strait instead of imposing a blanket restriction.
Pricing is another factor. Iraq's state oil marketer SOMO has offered discounts of as much as $37 a barrel below regional benchmarks for some contracted October supplies, potentially making Iraqi crude particularly attractive to Indian refiners.
Data from Kpler showed crude shipments through Hormuz to India averaged around 1.3 million barrels a day in September, the highest level since February. India's overall crude imports from the Middle East stood at about 2.8 million barrels a day, including Saudi supplies transported through the Red Sea.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
