Indian refiners face soaring oil premiums as Middle East tensions tighten supply

Physical oil markets are under strain as conflict-affected waterways limit term-contract deliveries, giving suppliers leverage over Indian refiners. Traders are now asking for spot premiums of $3-4 per barrel over Dubai-Oman, which itself trades $6-7 above Brent, resulting in an effective Gulf crude price roughly $10 higher than Brent. Saudi Aramco's official selling prices offer only modest relief, while West African crude is deemed increasingly uneconomic.

To offset the shortfall, Indian refiners are turning to more distant producers, including the United States, Brazil and Guyana. The earlier surge in Russian and Venezuelan discounts following a brief US-Iran truce has faded, with Russian discounts disappearing and Venezuelan price advantages shrinking. Further US sanctions on Russian oil buyers could add pressure, as the Senate has passed legislation proposing up to 100% tariffs on countries purchasing Russian crude.