Crude jitters, not crisis: Oil firms eye margin hit, but rule out supply shock amid Israel-Iran tensions

Time of India

12 hours ago

Indian oil companies
expect their profit margins to shrink due to rising crude prices but do not anticipate a major supply crisis after the Israel-Iran military conflict caused a sharp 9% spike in
oil prices
on Friday, reported TOI.
Benchmark
Brent crude
briefly surged to $78.50 a barrel before settling at $75.55- $6.19 above the previous close- marking the sharpest single-day swing since Russia's invasion of Ukraine in February 2022.
After holding a review meeting with petroleum secretary Pankaj Jain and top officials of state-run oil refiners and retailers,
Union Minister Hardeep Singh Puri
said India has sufficient energy reserves. 'India's energy strategy is shaped by successfully navigating the trilemma of energy availability, affordability and sustainability under the dynamic leadership of PM Narendra Modi,' he posted on X.
India consumes between 4.5 and 5 million barrels of oil per day. The country has emergency reserves of 5 million tonnes- about 37 million barrels- while refiners and oil firms hold additional stocks for 40–45 days. A significant volume of crude is also in transit, and fuel is stored across refineries and depots nationwide.
Despite this preparedness, India relies on imports for over 80% of its oil and half of its gas requirements. Around 50% of these imports pass through the
Hormuz Strait
, a vital chokepoint handling nearly 20% of global seaborne oil flows.
'India doesn't buy any oil from Iran. So there's no worry on that count,' a senior oil company executive said, speaking on condition of anonymity. 'As far as blocking Hormuz Strait is concerned, it is extremely unlikely. It has never happened before, even during earlier wars. Blocking Hormuz will draw in others in the region as both outbound crude and inbound refined products will halt. Iran itself will suffer.'
According to a statement by the Iranian government, the country's refineries and fuel depots under the National Iranian Oil Refining and Distribution Company have not sustained any damage and are operating normally.
The primary concern for oil companies is declining profitability. 'We are sure to end up taking a hit on profitability as under-recoveries return if oil remains elevated for an extended period,' another executive said.
While some believe the market has already absorbed the geopolitical risk—as evident from the fallback in crude prices—most agree that insurance premiums will rise due to increased threat perception and the likelihood of vessels avoiding conflict-prone waters.
'Iran may not block Hormuz. But Teheran-backed rebels could target vessels. Even in such cases, interruptions of a cargo or two can easily be bridged from elsewhere as India has a diversified pallate,' the first executive added.
Industry insiders said that margins on petrol and diesel sales are in single digits, while under-recoveries on domestic LPG cylinders have reached Rs 160–170. If crude remains costly, imported LNG- priced against Brent- will also see a rise in cost.