India Urges Middle East for New Crude Oil Pricing Amid Rising Shipping Expenses

India’s major state-owned refiners have urged a Middle Eastern supplier to present alternative pricing options for crude oil. This request comes as India seeks to secure the most cost-effective oil supply amidst a surge in both oil and shipping costs caused by U.S. sanctions on Russia’s oil trade.

Indian Oil Corporation, Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) have approached Abu Dhabi’s state oil company, ADNOC, to request price quotes on a delivered-at-port (DAP) basis alongside the traditional free-on-board (FOB) method commonly used by Middle Eastern suppliers. Under DAP terms, the seller covers expenses such as shipping, insurance, and other logistical services, unlike FOB, where buyers assume these costs.

The U.S. sanctions on Russian oil tankers, trading firms, and insurers have triggered a sharp rise in freight rates, doubling them within a week. Simultaneously, oil prices have climbed to a four-month peak. For India, which relies on imports for more than 80% of its daily crude consumption, the combination of escalating costs and the diminishing availability of discounted Russian oil has put significant pressure on refiners. Indian buyers are avoiding tankers specifically targeted by U.S. sanctions, further complicating procurement.

In response, Indian refiners are turning to the Middle East for more economical alternatives. They have requested ADNOC to offer DAP price quotes and plan to extend similar negotiations to Saudi Aramco. A source involved in the matter explained, “We want our term supplier to provide both FOB and DAP pricing. There’s a chance that DAP could result in better overall costs, especially with freight charges expected to rise further.”

Currently, India has been importing Russian crude on a DAP basis. Since Russia’s invasion of Ukraine and the ensuing sanctions, Russia has emerged as the largest crude supplier to India, the world’s third-largest oil importer. However, selling crude on a DAP basis is a rare practice among Middle Eastern producers like ADNOC.

By Bitumenmag

Oil, Petroleum, Bitumen, Shipping, Crude