India's oil and gas sector faces mounting pressure from a combination of elevated crude oil and liquefied natural gas prices coupled with surging freight costs, according to recent market analysis. The situation has been exacerbated by the fallout from the Iran war on global oil and LNG trade flows. While increased refining margins have provided some offset to downward pressures, gasoline and diesel marketing margins remain in negative territory, according to India-based brokerage Equirus.
The firm noted in a report carried by local media that high LNG prices in Asia are squeezing margins in the gas sector and are likely to lead to softer September imports of LNG. Asia's spot LNG price surged last week to its highest level since 2022, marking a 61 percent increase from a year earlier and a 22 percent gain over the past three months. Amid uncertainty about LNG supply from the Middle East and intensifying competition between Europe and Asia for winter gas supply, India's LNG imports are expected to trend downward this month from strong arrivals in August.
The higher LNG prices are creating significant cost pressures for India's major gas consumers. India's crude oil import bill has also soared in recent months due to reduced oil flows from the Middle East and heightened shipping risks in the Strait of Hormuz. Freight rates on the key route from Ras Tanura on Saudi Arabia's Persian Gulf to India have surged by more than 400 percent since February 28, when the Iran war began and disrupted shipping through the strait.
India paid 60 percent more for crude oil imports in the April-June quarter compared to the same period last year, as the surge in oil prices could not offset slightly lower import volumes. The elevated costs continued into the third quarter, with the July import bill running 41 percent higher than a year earlier. Source: Oilprice.com, Equirus, local Indian media reports
Source: oilprice.com