Brent crude has fallen sharply as the Strait of Hormuz reopens, Russia resumes offering discounts and global oil supplies improve.
Lower crude procurement costs are expected to improve refinery margins, with the financial gains likely to reflect in the July-September quarter.
Despite improving market conditions, uncertainties over US-Iran negotiations, sanctions on Russian and Iranian oil, and China's crude buying strategy could influence future price movements.
Brent Crude Has Crashed, Here's What It Means for India's Oil Companies
Brent crude prices have fallen sharply following the reopening of the Strait of Hormuz, improving the outlook for Indian refiners as lower input costs, renewed Russian discounts and easing supply disruptions are expected to support margins in the coming quarters
Summary
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Benchmark Brent crude dropped to about $72 a barrel, falling to pre-Iran war levels for the first time, on Thursday. This marks a sharp decline from an average of $99 in the first week of June and $109 during the three months till May.
The reopening of the Strait of Hormuz is intensifying supplier competition. Iran's re-entry into international markets, the UAE's exit from OPEC, and the continued availability of large Russian volumes are expanding market options, The Economic Times reported. This rapidly improving business environment strengthens buyers' bargaining power.
Russia has also resumed offering discounts on crude oil. Suppliers are reversing the hefty premiums charged after the Iran war began, the report added.
Earnings Outlook Improves
Refiners are currently processing high-cost crude. The financial benefits of cheaper crude will likely reflect only in the July-September earnings.
Retail fuel prices remain about ₹8 per litre above pre-war levels. The government implemented a ₹10 per litre fuel tax cut in March.
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Maintaining this tax structure and current retail rates could yield strong September quarter profits if crude prices remain near current levels, the report said.
Navigating Market Uncertainties
However, geopolitical risks remain high. Uncertainties persist over the finalization of the US-Iran deal and the future of sanctions on Iranian and Russian oil. Executives are also closely watching China's next move.
"We are still living by the day," the report cited an industry source as saying.
China sharply reduced crude purchases over the past two months. The world's largest importer helped suppress global prices during this period. However, any move by the country to rebuild its reserves could quickly tighten the market and drive prices higher.
Restoring West Asian Supplies
Suppliers are diversifying their trade routes as well. Indian refiners are seeking the cheapest legally available crude while honouring term-purchase commitments with West Asian suppliers now that the strait has reopened, executives said.
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Iraq, Kuwait, Qatar, and Saudi Arabia curtailed supplies or failed to deliver contracted volumes during the recent disruption. These nations are again ready to meet their commitments.
Some refiners have already begun placing orders and arranging logistics. Others will resume lifting West Asian crude in about a month after current supply arrangements expire, executives said.