High freight rates narrow Indian refiners’ crude oil choices, squeeze margins

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The Economic Times daily newspaper is available online now. Read Today's Paper High freight rates narrow Indian refiners’ crude oil choices, squeeze marginsBy Sanjeev Choudhary, ET BureauLast Updated: Oct 29, 2026, 12:04:00 AM ISTSynopsis

With freight rates reaching unprecedented levels, Indian refiners are facing escalating crude oil expenses that are eroding their margins. Notably, oil in the physical market is trading at a considerable premium over Brent futures, making Middle Eastern imports more desirable. The Iran conflict has led to congestion and trade shifts, aggravating delivery challenges. As a result, Indian refiners are increasingly turning to Gulf crude to meet their needs.

New Delhi: Soaring freight rates are narrowing Indian refiners' crude oil choices and deepening their dependence on Middle Eastern supplies. High freight and crude prices are also driving up costs and squeezing their refining margins.

Refiners are paying a steep premium for oil in the physical market, where crude is trading at about $20 a barrel above the Brent futures price of $115, according to industry executives. Freight costs of $10-20 per barrel, depending on the source, are adding to the burden, they said. India's state-run refiners, which largely sell in the domestic market where fuel prices do not quickly reflect global trends, are likely to face margin pressure.

Also Read: India woos South Korea, Cyprus to boost shipbuilding and maritime sector

Freight has become a dominant factor in crude sourcing, an industry executive said. High freight costs are making crude from distant sources such as the US, Venezuela and Russia less competitive with Gulf supplies, he said. Refiners choose a mix of crude grades based on availability and economics, weighing the value of the products each grade yields against crude prices and prevailing market conditions.

A tanker now charges $10-11 per barrel to transport oil from the Gulf region to Indian ports, compared with $1-$1.5 before the Iran war, the executive said. Shipping lines charge around $20-25 per barrel for a US oil cargo to India, against $3-3.5 before the war, he said. Freight rates vary by route, season, vessel size, risk perception and the demand-supply balance.

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Freight rates for Gulf supplies to destinations farther away, such as China, are even higher. "In September, tanker rates surged to historic highs. By mid-October, the cost of shipping crude from the Middle East Gulf to Asia on a large tanker had climbed to over $37 per barrel, more than five times its level before the war began," the International Energy Agency (IEA) said in a report last week. "In September, this surge in delivered crude costs pushed margins for Asian refiners processing crude from the Middle East into negative territory," it added.

Also Read: Cabinet approves Rs 10,000 crore container manufacturing scheme

Congestion around the Strait of Hormuz, rerouted trade flows and increased ship-to-ship transfers have lengthened delivery times and reduced fleet efficiency since the conflict began, pushing freight rates higher, the IEA said.

"The current market is not simply short of ships. It is short of vessels willing and able to operate efficiently in the Middle East Gulf, where war risk has fundamentally altered freight pricing," Matt Wright, an analyst at commodity analytics firm Kpler, recently wrote in a report.
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Read More News onHigh Freight RatesIndian Refiners Crude Oil ChoicesMiddle Eastern SuppliesFreight Costs ImpactCrude Oil PricesRefining MarginsBrent Futures PriceShipping RatesStrait of HormuzInternational Energy Agency

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Read More News onHigh Freight RatesIndian Refiners Crude Oil ChoicesMiddle Eastern SuppliesFreight Costs ImpactCrude Oil PricesRefining MarginsBrent Futures PriceShipping RatesStrait of HormuzInternational Energy Agency

(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)

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