Domestic oil firms likely to absorb crude up to $90 despite Middle East tensions: Report

New Delhi, March 12 (SocialNews.XYZ) Indian oil marketing companies (OMCs) should be able to absorb average crude prices of up to around $90 per barrel over the medium term, supported in part by stronger refining margins, even as escalating tensions in West Asia raise concerns over global energy supply routes, a report said on Thursday.

According to an analysis by CareEdge Ratings, the geopolitical situation notes that hostilities around the Strait of Hormuz have led to a sharp rise in crude prices since late February, briefly pushing benchmark Brent crude above the $100 per barrel mark before moderating.

The strait remains a critical chokepoint for global energy flows, accounting for roughly 20 per cent of the world’s oil and LNG supply, with about 20.8 million barrels per day of oil and petroleum products passing through the route.

For India, the disruption highlights a longstanding vulnerability in energy logistics, as around 40 per cent of its crude oil imports transit through the Strait of Hormuz, the report said.

However, the report also suggested that the risks are partly cushioned by India’s increasingly diversified sourcing strategy.

While West Asian countries still account for roughly half of India’s petroleum crude and product imports, the country has expanded purchases from suppliers such as the United States and Russia over the past five years.

India currently imports about 5.5–6 million barrels of crude oil per day, and analysts estimate that a $10 increase in crude prices could raise the country’s import bill by roughly $20 billion, according to CareEdge Ratings.

Beyond oil, the conflict could affect India through several external channels. Shipping disruptions in the region could weigh on trade flows, particularly as exports to West Asia accounted for about $64 billion, or nearly 15 per cent of India’s total exports, in FY25.

The report also pointed out that there could also be indirect macroeconomic effects if global financial markets move toward safe-haven assets such as the US dollar, potentially putting pressure on emerging market currencies including the Indian rupee.

At the same time, the report also noted "Despite these external risks, India maintains sufficient forex reserves to withstand shocks, though market volatility cannot be ruled out."

In a more adverse scenario where crude prices remain elevated above $100 per barrel for a prolonged period, the report estimated that India’s economic growth could see a modest impact, though the overall outlook remains supported by diversified energy sourcing and stable macroeconomic buffers.

Source: IANS