Hormuz Risks Force Indian Refiners to Halt Iraqi Oil Cargoes
Indian Oil Corp and Mangalore Refinery suspended crude liftings from Iraq as attacks on tankers in the Strait of Hormuz intensified
Synopsis
State-run Indian Oil Corporation and Mangalore Refinery and Petrochemicals have halted crude oil liftings from Basra port in Iraq, fearing rising security threats in the Strait of Hormuz. The move comes after a series of attacks on commercial tankers in the waterway and as the shipping ministry had cautioned against Indian crews joining ships that were transiting the chokepoint.
AdvertisementCargoes Cancelled
Indian Oil Corp. has scrapped a deal to ship two million barrels of Iraqi oil from the port of Basra to its tanker Lila Jamnagar, due to security fears in the Strait of Hormuz. Mangalore Refinery and Petrochemicals Ltd. had also postponed loading an Iraqi cargo on to the Indian-flagged tanker Desh Gaurav.
The Indian Oil has said it risked being hit by a projectile, following several other ships that had been hit with gunfire in recent days, while attempting to pass through the Hormuz straits with a full load.
AdvertisementWhat does the Chokepoint mean?
The Strait of Hormuz is the busiest oil route in the world linking the oil-producing countries in the Gulf with the rest of the world. The disruption has been a significant reduction in shipping movement through the strait since Iran fired on several oil tankers in a seemingly attempt to take control of the waterway, including the "dark" oil tankers, which are equipped with transponders that are turned off to evade detection.
New Delhi has taken preventive measures for the people of the city. India has called on shipowners, vessel operators and manning companies to refrain from sending Indian crew to ships transiting through the waters of Hormuz after the hostilities started.
The toll on human lives is already high: At least one crew member, an Indian national, was killed on an oil tanker attacked near Iraq, and 15 other Indian crew members were evacuated, said India's embassy.
Finding Alternatives
India's energy planners do not have to look elsewhere. Russian crude keeps flowing into Russia at about the highest rate of 2.45 million bpd while supplies from the UAE and Saudi Arabia have been relatively robust as both countries have the capacity to circumvent the Hormuz choke point by pipeline to Fujairah and Yanbu respectively. But, Iraq has no such alternate export route to protect its crude from disruption.
AdvertisementMarket Impact
The pullback has come at a time when prices have strengthened. A renewed series of attacks on oil tankers and a reported Houthis naval blockade of Saudi shipping in the Red Sea have pushed Brent crude back to above $90 a barrel.
Why It Matters
For years, Iraq has been one of India's top two importers of crude oil, and India is the world's third largest crude importer. If Basra liftings were to be halted, the refiners would have to rely more on Russian, Gulf and West African barrels, which would increase the landed costs and thus the crude import mix of the country, already being battered by the wider tensions in the Gulf region that would keep global oil prices elevated.
