SALAR NEWS

India faces higher oil import costs as crude touches $100

Rupee likely to deprecate; fuel to become costlier as inflation rises

PTI

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New Delhi, 8 Sept

India faces a higher oil import bill and renewed inflationary pressure after international crude prices surged on Tuesday amid concerns over supply disruptions in West Asia, with Brent approaching USD 100 a barrel.

Brent futures rose over 2 per cent to around USD 99, while US West Texas Intermediate gained nearly 3 per cent to about USD 94. Attacks on Saudi energy infrastructure and heightened Iran-US tensions have raised fears of further disruptions.

India, the world’s third-largest oil importer and consumer, imports over 88 per cent of its crude requirements. A sustained price rise could widen its dollar-denominated import bill, pressure the trade balance and rupee, and raise inflation through fuel, transport and energy costs.

India’s crude import bill jumped 56 per cent year-on-year to USD 63.4 billion during April-July, from USD 40.5 billion, despite import volumes remaining largely unchanged. The Indian crude basket averaged USD 106.26 a barrel on Monday, with its September average at USD 100.75, against USD 90.19 in August and USD 82.04 in July.

Retail petrol and diesel prices have remained unchanged for over three months after being raised on 25 May. The latest hikes followed a total increase of Rs 7.35 a litre in petrol and Rs 7.53 in diesel in four instalments in May.

Higher crude prices are also expected to squeeze margins of Indian Oil Corporation, BPCL and HPCL, while increasing LPG under-recoveries. Icra said auto-fuel marketing margins could turn negative and LPG under-recoveries could rise from about Rs 200 per cylinder.

Traffic through the Strait of Hormuz, which normally carries about a fifth of global oil and LNG supplies, has fallen sharply, with West Asian oil shipments dropping to about 11 million barrels a day from 18 million.

Wood Mackenzie expects Asia-Pacific oil demand to fall by 1.24 million bpd in 2026 and recover to pre-conflict levels only by late 2027. A prolonged conflict could cut global crude runs by 1.4 million bpd in Q4 2026, it said.

For India, analysts said a brief price spike would have limited impact, but prolonged high prices could strain inflation, the current account and the rupee.