PetroChina and Indian Oil Corporation recently failed to secure Very Large Crude Carriers (VLCCs) to lift Iraqi Basrah crude in late June 2026. PetroChina sought a vessel to load from Iraq's Basrah Oil terminal between June 25-30, while Indian Oil aimed to lift oil on June 22-23 for delivery to Paradip port on India's east coast. Each VLCC typically carries about 2 million barrels of oil. Neither company succeeded. PetroChina received six offers but walked away from all of them. Indian Oil received no offers at all and subsequently issued a force majeure on the cargo.
The immediate culprit is cost. Shipping rates have exploded to worldscale points of 650-750—nearly triple pre-conflict levels.
Beyond price, uncertainty persists despite an interim US-Iran deal aimed at reopening the Strait of Hormuz. Charters may still require special contractual clauses for transiting the strait, adding complexity and potential liability. Insurance premiums have also surged, making many shipowners reluctant to enter the region.
The inability to secure vessels has directly disrupted loading schedules. PetroChina's planned June 25-30 loading window from Basrah remains unfilled. Indian Oil, facing a complete lack of offers in its tender, declared force majeure on its June 22-23 cargo. This isn't just a short-term hiccup. Iraq's oil exports have collapsed by approximately 80% since the conflict began, dropping from over 3.4 million barrels per day to just 800,000-1,000,000 bpd. Southern exports have nearly halted completely. Even with Iran granting exemptions for Iraqi vessels, Iraq lacks its own large tanker fleet and relies entirely on foreign-owned vessels arranged by buyers—a bottleneck amid regional tensions.
Indian Oil's current crude inventory position significantly reduces its pressure to secure immediate tanker capacity. India maintains substantial stockpiles: commercial crude stocks including strategic reserves total around 100 million barrels. Crude oil in storage tanks, pipelines, and ships in transit covers roughly 25 days of national requirement, with fuel stocks covering another 25 days. The government estimates existing crude reserves can meet up to 60 days of national consumption when including cargoes on ships headed to India and pipeline inventories. While stocks have declined about 15% since the war began, the depletion rate is described as "moderate."
This buffer allows Indian Oil to make calculated trade-offs. Rather than accepting tripled shipping rates and transit uncertainty, the company is drawing down existing inventories and waiting for market conditions to stabilize. The force majeure declaration reflects a strategic decision to prioritize cost control over immediate procurement. India's state-owned refiners have already secured sufficient crude supplies for nearly two months and are taking a cautious approach to resuming Middle East purchases despite improving shipping activity through the Strait of Hormuz.
Even with the Strait of Hormuz technically reopening following a June 17 US-Iran memorandum of understanding, Indian refiners are maintaining caution. Daily transits remain at a fraction of prewar levels, and commercial traffic has largely not recovered despite diplomatic declarations. Previous reopening attempts failed—Iran announced the strait open on April 17, only to reverse course and shut it one day later after the US refused to lift its naval blockade. This history creates skepticism about durability.
Indian refiners are also leveraging successful diversification. Middle Eastern crude imports fell to their lowest level since at least 2013 in Q2 2026. State-owned refiners compensated by increasing spot purchases from Russia and South America.
The central government has not yet issued guidance on when ships can safely return to load crude cargoes from the region, adding another layer of hesitation.
While specific documentation of exactly "forty tankers" diverted for cooking gas wasn't found, substantial evidence shows significant LPG vessel diversion impacting crude capacity. Indian buyers with vessels on time charter originally meant for Middle East liftings are now unable to deploy them there due to Strait of Hormuz disruptions. These vessels are being diverted to load FOB U.S. cargoes instead of remaining idle. The global VLGC fleet experienced record repositioning toward the US Gulf Coast, peaking at 150 vessels in mid-March 2026.
LPG freight rates have surged, making this cargo type more attractive for vessel owners. The Ras Tanura–India VLGC freight rate jumped to $115.67/mt in April 2026, up 65% from February levels. India's LPG imports have exploded: from 180,800 mt in February 2026 to 491,100 mt in May 2026—a 172% increase. India requires an estimated 29-34 LPG cargoes per month to meet demand. This creates substantial ongoing vessel demand that competes directly with crude oil tanker needs.
Government priorities clearly favor LPG over crude oil.
With over 330 million LPG consumers, primarily households, maintaining cooking fuel supply is politically sensitive.
Indian Oil itself is shifting strategy. The company launched a tender to charter an 80,000-84,000 CBM VLGC for long-term LPG imports from Qatar, Kuwait, and the UAE, securing logistics for its 48% domestic LPG market share. This move from spot-market reliance to structured long-term chartering dedicates substantial vessel capacity to LPG rather than crude oil transport.
Both PetroChina and Indian Oil are making strategic allocation decisions that leverage their substantial inventory buffers. China maintains a massive 1.2-1.3 billion barrel stockpile, while India has 18-60 days of crude coverage. This allows both companies to defer crude oil purchases rather than competing aggressively for limited tanker capacity against prioritized LPG shipments.
The VLCC market itself faces structural supply tightness. The commercial VLCC fleet available for unsanctioned trade has been declining since 2023, falling to 2021 levels. Vessels migrating into shadow fleets, fixed on time charters, and concentrated ownership are creating greater rate volatility. Extended voyage times for alternative routes—U.S. Gulf to India takes 30-45 days compared to 5-7 days from the Middle East—remove vessels from the trading pool for longer periods, creating cascading availability issues.
The situation appears to be in a wait-and-see mode. PetroChina and Indian Oil are maintaining cautious approaches despite diplomatic progress, prioritizing cost control and risk management over immediate volume restoration. Regional supply chain disruptions—including Iraq's 80% export collapse, lack of national tanker fleet, elevated insurance premiums, and structural tanker shortages—continue to constrain the ability to secure Iraqi crude cargoes.
Market participants expect ship-to-ship transfer trends to taper following the US-Iran memorandum, but normalization will take time. Until then, both companies will likely continue leveraging their inventory buffers and diversified sourcing strategies while waiting for greater certainty on shipping routes and freight costs before committing to pre-conflict operational patterns with Iraqi crude.
