Indian Oil Corp (IOC), the country's top refiner, plans to 'slightly' reduce its Middle Eastern oil purchases under annual deals in 2027/28 as the Iran war has created uncertainty for supplies from the region, according to a source familiar with the matter. As reported by Reuters, the state-run refiner is expected to make a modest reduction in its annual contracted volumes from Gulf producers, marking a shift in IOC's procurement strategy. For the current financial year ending March 2027, IOC had originally planned to source about 47% of its crude imports from Middle Eastern producers under annual deals on a free-on-board basis, with the buyer bearing shipping costs after oil loading. The move reflects broader challenges facing Indian refiners who traditionally relied on the Middle East for more than half of their annual crude supplies, particularly heavier, high-sulphur grades due to the region's proximity.
Disruptions to oil supplies from the region, as the Iran war enters its eighth month, have forced Asian refiners to suspend purchases under some annual deals, as reported by Reuters. Attacks on vessels transiting the Strait of Hormuz have restricted tanker availability and pushed freight rates close to record highs. Refiners have instead turned to spot purchases, with some producers offering crude on a delivered basis and absorbing part of the elevated freight costs to attract buyers. The prolonged conflict has complicated traditional procurement arrangements that relied on the region's proximity and availability of heavier crude grades.
In recent months, some Indian refiners, including IOC, have bought Iraqi oil sold at a discount to the Dubai benchmark on a free on board basis, according to a source familiar with the matter. Indian refiners initially increased purchases of Russian oil to compensate for reduced Middle Eastern supplies, but Russian oil imports could ease in the coming months as more supplies become available through the Strait of Hormuz and Middle Eastern producers offer discounts on crude and freight to retain market share.
Indian Oil in July issued a tender to buy a stake in at least two very large gas carriers, as reported by The Economic Times. However, the refiner has paused the plan to award the tender as costs have almost doubled to about $150 million for a 10-year-old vessel since it floated the tender, highlighting the challenges facing infrastructure investments amid current market uncertainties.
