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Time of India
a day ago
- Business
- Time of India
Crude jitters, not crisis: Oil firms eye margin hit, but rule out supply shock amid Israel-Iran tensions
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.
Time of India
2 days ago
- Business
- Time of India
Oil companies brace for hit on margins but see no supply disruption from Israel-Iran conflict
NEW DELHI: Downstream oil companies are bracing for a hit on their margins but do not see much chance of major supply disruption after crude spiked 9% on Friday following the breakout of military conflict between Israel and Iran. Benchmark Brent crude jumped to $78.50/barrel but settled at $75.55, or $6.19 higher than the previous close, marking the widest intra-day movement since Russia's February 24, 2022 invasion of Ukraine when the price had hit $105. Oil minister Hardeep Puri assured "adequate energy supplies for the coming months" after reviewing the situation with petroleum secretary Pankaj Jain and heads of state-run refining and fuel retailing companies, which meet 90% of the domestic fuel needs. 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 said on X after the meeting. India's oil consumption is pegged at 4.5-5 million barrels per day. The country has an emergency reserve of 5 million tonnes, or almost 37 million barrels. In addition, oil companies store 40-45 days of crude, while large quantities remain seaborne in transit. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch vàng CFDs với mức chênh lệch giá thấp nhất IC Markets Đăng ký Undo Refiners also store fuel at their plants and depots across the country. But the country also depends on imports to meet over 80% of its oil and 50% gas consumption. Half of this comes from the Gulf through the Hormuz Strait, the chokepoint through which a fifth of global seaborne oil trade goes through. "India doesn't buy any oil from Iran. So there's no worry on that count. As far as blocking Hormuz Strait is concerned, it is extremely unlikely. It has never happened before, even during the earlier wars in the region. Blocking Hormuz will draw in the others in the region as outward cargos of oil and in-bound refined product shipments will stop. Iran itself will suffer," a senior executive of an oil company said on condition of anonymity. A statement from the Iranian government said no damage was caused to National Iranian Oil Refining and Distribution Company's refineries and fuel depots, which continue to function normally. The real worry, an executive of another company said, is a reduction in profitability. "We are sure to end up taking a hit on profitability as under-recoveries return if oil remains elevated for an extended period," the executive said. Others, however, said the market has already factored in the risk as seen from the fact that prices fell from their intra-day peak. But all agree that insurance costs will head north due to higher risk premia and vessels avoiding the route. "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 quoted above said. Industry sources said the retailers' margins on petrol and diesel currently stand in single digits. But they are incurring under-recovery of Rs 160-170 on domestic LPG. Even LNG will become costlier if oil prices remain high as most of India's gas contracts are benchmarked to Brent. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
