Saudi Aramco stopped supplying crude oil to Indian refiners until further notice. The development adds pressure on Indian refiners, which are already facing higher crude prices, increased tanker freight costs and disruptions to traditional supply routes. The supply halt comes amid wider disruptions to crude flows from the Gulf region. Saudi Arabia’s East-West pipeline has reportedly been shut following an attack, limiting the kingdom’s ability to transport crude to its western ports. Meanwhile, disruptions around the Strait of Hormuz have reduced alternative supply routes. Saudi crude has traditionally remained an important source for Indian refiners, with Aramco accounting for around 9% of India’s crude imports since the beginning of the conflict.
Alternative Crude Supplies Could Cost More
For Indian refiners, the immediate challenge is not necessarily finding replacement crude but securing those supplies at competitive prices. Brent crude prices surged to around $108 a barrel on Wednesday and continued to trade above $105 a barrel. Although Indian refiners can seek crude from other producers, replacing Saudi supplies could increase procurement costs as global benchmarks and spot prices remain elevated. Refiners are also facing higher tanker freight rates. At the same time, discounts on Russian crude have narrowed or disappeared, making this alternative source less attractive from a cost perspective.
Aramco Continues Some Spot Market Sales
However, the supply halt does not mean Saudi crude has completely disappeared from the market. Aramco continues to sell some crude cargoes to traders through the spot market. Consequently, some of these cargoes could eventually reach Indian refiners through the Strait of Hormuz. However, spot-market purchases may not offer the same supply certainty or pricing advantages as regular term contracts.
Impact on Indian Refiners
The disruption comes at a sensitive time for India’s refining sector, which relies heavily on imported crude to meet domestic fuel demand and operate refining facilities. Higher crude procurement costs could put pressure on refining margins, particularly if refiners cannot fully pass higher costs on to product prices. Therefore, refiners may need to optimise their crude mix, diversify suppliers and make greater use of available spot cargoes.
Potential Impact on India’s Oil Import Bill
The impact will ultimately depend on how long the Saudi supply disruption continues and how quickly normal crude flows through key Gulf routes resume. A prolonged disruption could tighten crude availability in the region while keeping oil prices and freight rates under pressure. As reported by news18.com, for India, sustained higher crude prices could also increase the overall oil import bill if refiners have to secure replacement barrels at higher costs.
