Indian crude basket surges 30% from July low, crosses $106 a barrel

India's crude oil basket has surged nearly 30% from its July low, crossing $106 a barrel on September 7, as global oil prices have risen sharply in recent weeks.

According to Petroleum Planning and Analysis Cell (PPAC) data, the Indian crude basket averaged $82.04 a barrel in July, its lowest level in the current financial year. It rose to $90.19 in August, while the September average has so far reached $100.75 a barrel. The basket stood at $106.26 a barrel on September 7, marking a rise of around 29.5% from the July average.

The Indian basket is a derived benchmark comprising Brent Dated crude and the average of Oman and Dubai crude, based on the crude imported by Indian refineries.

Meanwhile, Brent crude was trading at around $98.45 a barrel at 6.09 pm IST on Tuesday.

For India, which imports more than 88% of its crude oil requirement, a sustained rise in international oil prices could increase the country's import bill and put pressure on fuel economics.

“Renewed hostilities between Iran and the US pose a challenge for the limited crude oil supplies coming through the Strait of Hormuz. Further, as Iran threatens to establish a new restricted maritime zone extending beyond the Strait of Hormuz, additional energy flows beyond the latter could be at risk. Owing to these developments, crude oil prices have increased in the past few days and the Indian crude basket has crossed the $100/barrel mark,” said Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd.

“As a result of the surge in crude prices, marketing margins on auto fuels are likely to turn negative and domestic LPG under-recoveries could increase from the current ~Rs 200/cylinder,” he said.

Meanwhile, government sources said the free-on-board (FOB) price of Brent was around $106 a barrel, while Oman and Dubai crude were trading at about $105 a barrel.

The sharp increase in crude prices comes alongside elevated prices of refined petroleum products. The high-speed diesel (HSD) crack was around $51 a barrel, while the aviation turbine fuel (ATF) crack stood at about $45 a barrel, according to the Petroleum Secretary.

A product crack refers to the difference between the price of a refined petroleum product and the price of crude oil used to produce it. Higher cracks can support refinery margins, although the impact on individual refiners depends on their crude mix, refinery configuration and operating costs.

The rise in crude prices is likely to increase pressure on India's oil marketing companies (OMCs), particularly if domestic petrol and diesel prices are not adjusted in line with international market conditions.