Reading this on Krawl? Register for free.
Unlock listen-aloud, reading history and personalised feeds — at zero cost.
Free registration unlocks the full Finance Desk
Indian Crude Basket Surges 51.5% in 20 Days, Squeezing Oil Marketers
India's crude oil basket price climbed 51.5% in 20 days, reaching $103.33 per barrel by July 23. This surge, fueled by expectations of a US-Iran peace agreement, has pressured state-owned oil marketing companies.
Crude Basket Rises, Pressuring OMCs
India's crude oil basket experienced a significant price increase, surging 51.5% in just 20 days to reach $103.33 per barrel by July 23. This jump from $68.21 on July 3 was initially driven by expectations of a US-Iran peace agreement, which briefly tempered prices. However, the subsequent rise has intensified financial pressure on state-owned oil marketing companies.
The latest price escalation is already reflected in September futures contracts. If crude prices remain high for several more weeks, it could negatively impact oil retailers' financial performance during the second and third quarters, according to a senior executive at an oil marketing company. On July 23, the crude basket stood 30.6% above July's average of $79.10 per barrel and 24.2% higher than June's average of $83.22. However, it remained 2.7% below May's average of $106.23 and 9.7% lower than April's average of $114.48.
Market Volatility and Geopolitical Strain
Oil futures declined more than 3% on Friday but were still set for robust weekly gains, driven by escalating disruptions to energy flows in the Red Sea and fears of a broader conflict involving the US and Israel with Iran. Brent futures fell $3.59, or 3.57%, to $97.10 a barrel after previously settling above $100 for the first time since May. The contract remains on track for a weekly gain exceeding 10%. West Texas Intermediate futures fell $3.14, or 3.41%, to $89.05 a barrel but are headed for a nearly 8% weekly increase.
Market volatility intensified following claims by Iran-aligned Houthis of striking two Saudi oil tankers in the Red Sea. The price surge was also partly attributed to Hindustan Petroleum Corporation and Bharat Petroleum Corporation reporting combined losses exceeding $144.91 million in the June quarter, with their LPG under-recoveries surpassing $82.78 million.
June saw a brief period of market stability, but recent geopolitical developments have rapidly reshaped the operating environment. The absence of discounts on Russian crude has also heightened concerns, although supply stability persists. Officials are monitoring potential disruptions through the Bab el-Mandeb Strait, which could emerge as a new energy security challenge. Prolonged interruptions could threaten crude supplies from Saudi Arabia and Russia, leading to higher freight costs and global oil prices.
Outlook on Brent and Inventory Buffers
If the current conflict remains confined to one month, Brent crude is likely to average around $94 monthly - global inventory buffers are finite. As per an estimate each additional month of disruption would necessitate progressively larger releases from a shrinking pool of available barrels, potentially adding $7-8 to Brent's monthly average and lifting it to around $114 if disruptions extend to three months.
Found this useful? Share it!
Interested in Finance Education?
Explore our CFA and investing courses — built for serious learners.
