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Middle East crude exports have recovered to more than 90% of pre-conflict levels, while shipping costs remain eight times higher than before the conflict, diesel margins stay elevated and rising gas prices continue to put pressure on energy costs.
Crude oil supplies from West Asia have recovered to more than 90 per cent of pre-conflict levels, but elevated shipping costs, high diesel margins and rising natural gas prices are likely to keep energy costs under pressure, according to a report by Jefferies.
The report said crude exports from West Asia, excluding Iran, had returned to more than 90 per cent of pre-conflict levels despite continued attacks in the Gulf of Oman. The physical crude premium declined 65 per cent week-on-week to $9 per barrel, indicating improved supply availability.
However, shipping costs remain significantly elevated. Freight rates are around eight times their levels at the start of the conflict and account for more than 25% of the landed cost of crude, compared with just 3 per cent before the conflict. Jefferies said freight rates could remain high in the near term amid continued attacks on oil tankers.
Refining margins have declined week-on-week but remain elevated. Singapore gross refining margins averaged $14 per barrel in the year-to-date period of FY27, while gasoline, diesel and aviation fuel price spreads stood at $26, $69 and $68 per barrel, respectively.
Jefferies said the normalisation of supply chains would take time, potentially supporting elevated refining margins through FY27.
The report also highlighted pressure on oil marketing companies (OMCs). Based on 15-day average pricing, petrol and diesel marketing losses were estimated at Rs 28 and Rs 34 per litre, respectively. Procurement costs were comparable to an Indian crude basket price of $120 per barrel.
More from BusinessMeanwhile, petrochemical margins have strengthened. Average margins for polyethylene, polypropylene and polyethylene terephthalate were 68 per cent higher than at the end of February, supporting Reliance Industries’ oil-to-chemicals profitability.
Gas prices also remain elevated. Spot liquefied natural gas (LNG) prices averaged $29 per million British thermal units, up 12 per cent week-on-week. European gas storage stood at 75 per cent, compared with 83 per cent a year earlier. Jefferies expects gas prices to remain elevated as winter approaches.
The report added that the US had waived key duties linked to its Russia sanctions legislation for 60 days, easing a potential source of pressure on major importers of Russian crude, including India and China.
