New Delhi [India], October 22 (ANI): Crude oil supplies from the Middle East have recovered to more than 90 per cent of pre-conflict levels, but high freight rates, elevated diesel margins and rising gas prices are likely to keep energy costs under pressure, according to a report by Jefferies.
The report said crude exports from the Middle East, excluding Iran, had returned to levels above 90 per cent of those recorded before the conflict, despite continued attacks in the Gulf of Oman. The physical crude premium declined 65 per cent week-on-week to USD 9 per barrel, indicating improved supply availability.
“Overall flows (ex-Iran) are back to >90% of pre-war levels despite heightened attacks in the Gulf of Oman. Physical crude premium declined by 65% to US$ 9/bbl last week,” the report said.
However, the report cautioned that shipping costs remained high. Freight rates were around eight times their levels at the start of the conflict, accounting for more than 25 per cent of the landed cost of crude, compared with 3 per cent before the conflict. Jefferies said freight rates could remain elevated in the near term amid attacks on oil tankers.
Refining margins have declined week-on-week but remain high. Singapore gross refining margins averaged USD 14 per barrel in the year-to-date period of FY27, while gasoline, diesel and aviation fuel price spreads stood at USD 26, USD 69 and USD 68 per barrel, respectively.
"Normalization of supply chains is likely to take time, likely supporting elevated margins over FY27," the report said, referring to the refined fuel market.
The report also highlighted the pressure on oil marketing companies (OMCs), with petrol and diesel marketing losses estimated at Rs 28 and Rs 34 per litre, respectively, based on 15-day average pricing. Procurement costs were comparable to an Indian crude basket price of USD 120 per barrel, it said.
Meanwhile, petrochemical margins have strengthened. Average margins for polyethylene, polypropylene and polyethylene terephthalate were 68 per cent higher than at the end of February, supporting Reliance Industries' oil-to-chemicals profitability, according to Jefferies.
Gas prices also remain elevated. Spot liquefied natural gas (LNG) prices averaged USD 29 per million British thermal units, up 12 per cent week-on-week. European gas storage stood at 75 per cent, compared with 83 per cent a year earlier.
"Domestic affordability is stretched at current prices," the report said, adding that gas prices were expected to remain elevated as winter approaches.
The report also noted that the US had waived key duties linked to its Russia sanctions legislation for 60 days, easing a potential source of pressure on major importers of Russian crude, including India and China. (ANI)
Oil supply improves as Middle East crude exports recover, but high fuel costs may persist: Jefferies
