Sufficient stock, India won't face immediate oil disruption amid Iran crisis
India Today
India imports 88 per cent of its crude oil – the raw material for making fuels like petrol and diesel – and about half of its requirement for natural gas - the feedstock for generating electricity, producing fertiliser, fuel for household kitchens and CNG for automobiles – and cooking gas LPG.
With crude inventories sufficient to meet at least 10 days of requirements and fuel stocks covering another 5-7 days, India is unlikely to face any near-term disruption in oil supplies from the closure of the key supply route of the Strait of Hormuz, officials said.
Even as rapidly unfolding developments, following US and Israeli military strikes on Iran, including the reported killing of the Islamic Republic's Supreme Leader, suggest the conflict may not last very long, New Delhi has contingency plans in place should tensions escalate, top officials and analysts said.
Iran's state media said on February 28 that the Islamic Republic has shut the Strait of Hormuz - one of the world's most critical energy chokepoints through which about a fifth of global oil and gas supplies transit - in response to US and Israeli missile strikes.
The closure for a short duration will not have much impact on India as it already has supplies to meet fuel requirements, they said, adding that in the event of a prolonged disruption or closure of the narrow Strait of Hormuz, the country can recalibrate imports, tapping into its diversified supply sources, including increasing purchases of Russian oil.
The immediate fallout is expected to be reflected in oil prices. Brent crude closed the week near seven-month highs at around USD 73 per barrel, after rising roughly 16 per cent since the start of the year. Traders are bracing for heightened volatility next week, with some models pointing to prices moving towards USD 80 a barrel if supply flows are disrupted or face credible threats.
India imports 88 per cent of its crude oil - the raw material for making fuels like petrol and diesel - and about half of its requirement of natural gas - the feedstock for generating electricity, producing fertiliser, fuel for household kitchens and CNG for automobiles - and cooking gas LPG.
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Sensex has declined over 6,000 points or roughly 7.5% in a little over two weeks as global tensions and rising oil prices triggered selling in equities.
Speaking in Parliament, Union Petroleum and Natural Gas Minister Hardeep Singh Puri said India has adequate fuel stocks, and there is no cause for concern over availability.
Industry sources told India Today TV that airline operators are now paying additional insurance charges for every aircraft flying into the Middle East, significantly increasing the cost of operations on these routes.
Under law, a domestic household is generally allowed to keep two LPG cylinders of 14.2 kg each at a time. This usually includes one cylinder connected for use and another spare cylinder kept as backup.
Early signals from GIFT Nifty suggest that the benchmark indices could open lower when trading begins. GIFT Nifty futures were trading at 23,784.50 at around 7:58 am. This indicates that the Nifty 50 may open below Wednesday's closing level of 23,866.85.
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The move comes as global energy markets remain on edge due to escalating tensions linked to the conflict involving Iran, which has raised fears of disruptions to crude oil shipments from the Middle East.
India consumes roughly 5.3 to 5.5 million barrels of crude oil every day. However, domestic production is only about 0.6 million barrels per day. This means the country depends on imports for nearly 85% of its oil needs.