India Seen Making Slow Return to Mideast Oil as Hormuz Reopens

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(Bloomberg) — India’s state-run refiners have already secured enough crude for the next two months and are in no rush to resume purchases from the Middle East even if the Strait of Hormuz reopens to commercial traffic.

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Local processors have been asked by Middle Eastern suppliers, including Abu Dhabi National Oil Co., to begin taking contractual volumes under long-term supply agreements, according to people familiar with the matter, who didn’t wish to be identified as the information isn’t public. The refiners, however, have yet to commit, they said.

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The global oil market is zeroed in on the waterway after the US and Iran agreed to an interim peace deal this week that should allow transits to resume. During the conflict, energy shipments initially came to a near-total halt — with the strait subject to a double blockade by both Tehran and Washington — but they are now starting to recover as ships trickle through.

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India’s imports of Middle Eastern crude, much of which is procured under term contracts, fell in the second quarter to the lowest level since at least 2013, according to data compiled by Kpler. The decline came as the state-owned refiners took more spot cargoes from alternative suppliers including Russia and South America to make up for the missing Persian Gulf barrels.

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The central government in New Delhi has yet to make a call on when vessels can safely return to load cargoes in the region, the people said. State-owned refiners in the South Asian nation typically purchase Middle Eastern crude on a loading basis, requiring buyers to arrange shipping.

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Refiners are also bracing for higher freight rates as global buyers rush to secure tankers due to uncertainty over the durability of the ceasefire agreement. That makes cut-price cargoes from suppliers such as Russia — bought on a delivered basis — more attractive.

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Despite the expiry of US waivers on Russian crude on Thursday, Indian refiners are likely to continue taking the country’s barrels as the industry has largely found workarounds, the people said. Moscow’s cargoes remain cheap, with discounts of $1 to $2 a barrel to Dated Brent, they said. The discounts may widen further as supply availability improves, the people added.

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Indian Oil Corp. recently issued a tender to charter a very large gas carrier, a Suezmax tanker, and a very large crude carrier to take liquefied petroleum gas and crude from ports behind the Strait of Hormuz, the people said.

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The New Delhi-based, state-owned refiner had been testing the market for vessel availability, and that tender need not be read a signal of an imminent resumption of imports from the region, they said.

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Adnoc declined to comment. Separately, India’s oil and shipping ministries, as well as Indian Oil, didn’t immediately reply to emails seeking comments.

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