The renewed rally in crude oil and LNG prices and the higher freight costs are pressuring the marketing margins of India’s oil and gas sector, which has to contend with the fallout of the Iran war on global oil and LNG trade flows.
Increased refining margins offset some of the downward pressure, but gasoline and diesel marketing margins remain negative, while high LNG prices in Asia would squeeze margins in the gas sector and likely lead to softer September imports of LNG, India-based brokerage Equirus said a note carried by local media.
Amid uncertainty about LNG supply from the Middle East and intensifying competition between Europe and Asia for winter gas supply, Asia’s spot LNG price surged last week to the highest level since 2022. That’s 61% higher from a year earlier and a 22% increase in the past three months.
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As a result, India’s LNG imports are likely to trend down this month from strong arrivals in August, according to Equirus.
The higher LNG prices are pressuring the big gas consumers in India, as their costs remain very high.
Meanwhile, India’s crude oil import bill has soared in recent months, due to the reduced oil flows from the Middle East and the high risks to shipping in the Strait of Hormuz.
The freight rates on the key route from Ras Tanura on Saudi Arabia’s Persian Gulf to India have soared by more than 400% since February 28, when the war began, and Iran closed off the Strait of Hormuz.
India paid 60% more for crude oil imports in the April-June quarter compared to the same period last year, as the surge in oil prices couldn’t offset slightly lower import volumes.
The rise continued into the beginning of the third quarter, with the July import bill 41% higher from a year earlier.
By Charles Kennedy for Oilprice.com
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