New Delhi [India]: A recent report by Jefferies indicates that crude oil supplies from the Middle East have largely recovered, now exceeding 90% of pre-conflict levels.
This improvement comes despite ongoing attacks in the Gulf of Oman, with physical crude premiums declining significantly, signaling better availability in the market.
However, the report cautions that consumers might not see immediate relief at the fuel pumps. High freight rates, which are now eight times higher than before the conflict and account for over 25% of the landed cost of crude, are a major concern. These elevated shipping costs are expected to persist due to continued threats to oil tankers. Furthermore, refining margins, though slightly down week-on-week, remain high, with Singapore gross refining margins averaging USD 14 per barrel this fiscal year. This suggests that the cost of processing crude into usable fuels is still substantial.
The report also highlights the significant pressure on Indian oil marketing companies (OMCs), which are estimated to be incurring losses of Rs 28 per litre on petrol and Rs 34 per litre on diesel. This is based on procurement costs comparable to an Indian crude basket price of USD 120 per barrel. The normalization of global supply chains is anticipated to take time, which could keep these elevated margins and costs in place. Adding to the energy price concerns, gas prices also remain high, with spot liquefied natural gas (LNG) averaging USD 29 per million British thermal units. As winter approaches, these prices are expected to stay elevated, impacting household budgets and industrial operations across the country.