Indian Oil Corp (IOC) plans to cut its Middle Eastern oil purchases under annual deals in 2027/28 as the Iran war has created uncertainty for supplies from the region, a source familiar with the matter said.
Indian refiners traditionally relied on the Middle East for more than half of their annual crude supplies, particularly heavier, high-sulphur grades, because of the region’s proximity.
IOC, the country’s top refiner, had planned to source about 47% of its crude imports from Middle Eastern producers under annual deals on a free-on-board (FOB) basis in the financial year ending March 2027.
The state-run refiner will “slightly” reduce the volume of crude it buys under annual deals with Gulf producers next year, the source said, declining to be identified because of the sensitivity of the matter.
Disruptions to oil supplies from the region, as the Iran war enters its eighth month, have forced Asian refiners to suspend purchases under some annual deals.
Attacks on vessels transiting the Strait of Hormuz have also constrained shipping availability and driven freight rates to near-record highs.
Refiners have instead turned to spot purchases, with some producers offering crude on a delivered basis and absorbing part of the elevated freight costs to attract buyers.
However, in recent months, some Indian refiners, including IOC, bought Iraqi oil sold at a discount to the Dubai benchmark on a free on board basis, the source said.
Indian refiners initially increased purchases of Russian oil to compensate for reduced Middle Eastern supplies.
However, Russian oil imports could ease in the coming months as more supplies become available through the Strait of Hormuz and Middle Eastern producers offer discounts on crude and freight to retain market share.
Indian Oil in July issued a tender to buy a stake in at least two very large gas carriers. The refiner has, however, paused the plan to award the tender as costs have almost doubled to about $150 million for a 10-year-old vessel since it floated the tender.
(Reporting by Nidhi Verma; Editing by Kate Mayberry)