MRPL, IOC secure Iraqi crude cargo amid Hormuz reopening

Iraq oil flows resume: Indian state-owned refiners are returning to Iraq’s crude market, signaling a normalization after weeks of disruption post the US-Israel-Iran war.

The latest: Indian Oil Corporation has chartered a VLCC Lila Jamnagar to lift around 2 mn barrels of Basrah oil from Iraq around 23 July, while Mangalore Refinery and Petrochemicals has booked the Aframax tanker Jasmin Joy to load Basrah oil for its 300k bbl / d New Mangalore refinery, Reuters reports (here and here).

REMEMBER- MRPL was the first state-owned refiner to secure Iraqi cargo since the partial reopening of the Hormuz.

Why it matters: The latest charter bookings suggest that Indian refiners are rebuilding Iraqi oil supplies which the Iran war brought to a halt. These early signs come with an overhang of higher freight charges, war-risk ins., and stricter compliance requirements.

A reversal: Just weeks ago, IOC had failed to attract a single bid to lift Iraqi crude and declared force majeure on the cargo as shipowners balked at sailing through the Hormuz.

The takeaway: Despite Indian refiners securing Iraqi crude cargoes, the shipping conditions are yet to return to pre-war levels. The pace at which freight and ins. costs ease going ahead will determine how quickly normal trades will resume.

Saudi, Russia step up fight for crude market

Gulf producers and Russia are competing for a share in Asian oil markets. Saudi Arabia’s Aramco has cut the August official selling price of its flagship Arab Light crude to Asia by USD 11 / bbl, offering a USD 1.5 / bbl premium over the regional benchmark — its lowest level in nearly four years, Bloomberg reports.

Russia follows: Markdowns on Russia’s flagship Urals crude have also widened to more than USD 10 / bbl for August deliveries in India, reversing the premium it commanded between March and June when low Gulf supplies pushed buyers toward Russian barrels.

Spoilt for choice: Middle East producers are ramping up oil exports, while Russia is exporting more crude after Ukraine drone attacks curtailed domestic refining. Chinese refiners, too, have stepped up Gulf buying, weakening the demand for Russian crude.

The backdrop: India imported a record 4.9 mn bbl / d of crude in June, half of which was supplied by Russia.

Iranian crude back on India’s radar?

India’s plans to secure more Iranian oil have been put on hold as fresh US sanctions on Tehran oil throw a spanner in the works. State-run refiners had held talks with traders marketing Iranian oil to buy barrels if the sanctions waiver extended beyond August, Bloomberg reports. As Washington revoked the license authorizing the sale of Iranian oil, Indian refiners may have to wait until the dust settles.

IN CONTEXT- Iranian crude was being offered up to USD 5 / bbl below Brent, which made the offer attractive for refiners. Indian state refiners had already booked crude shipments through August after securing supplies early during the Middle East conflict, leaving little room for immediate Iranian cargoes. Any new purchase of Iranian oil may be considered for September deliveries, if sanctions ease.

Why it matters: Iran accounted for as much as 10% of India’s oil imports in 2018 before US sanctions choked flows. Since then, flows from the Middle East — including the UAE, where shipments hit a multi-year high in May — and Russia have emerged as dominant suppliers.

India plans its first strategic natural gas reserve

India is mulling developing its first-ever strategic natural gas storage system after the Iran war exposed the country’s vulnerability to LNG and LPG supply disruptions, Hindu Businessline reports, citing an unnamed source. Senior government officials are carrying out assessments on the contours of the storage system.

State-run energy companies are evaluating multiple storage options: underground salt caverns, depleted gas fields, and above-ground cryogenic LNG tanks. Engineers India is conducting feasibility studies given that Indian Strategic Petroleum Reserves Limited (ISPRL), which manages the country’s crude oil reserves, does not have expertise in gas storage using salt caverns.

Supply security takes center stage: The move follows concerns over India’s dependence on the Gulf, which supplies more than half of its LNG and LPG imports. Building strategic gas reserves would provide a buffer against price and supply volatilities.