Crude Costs Are Exploding For Indian Refiners: Here’s What Changed

Indian refiners are facing a sharp increase in crude procurement costs as physical supplies tighten, Gulf crude premiums rise and discounts on Russian and Venezuelan oil narrow.

Brent futures rose by around $10 a barrel in two weeks, trading above $91 a barrel on Tuesday, August 18, 2026, according to Economic Times. Spot prices had crossed $93 a barrel the previous week.

The rise comes as refiners lose the pricing advantage they had enjoyed from discounted Russian crude, while price concessions on Venezuelan oil have also diminished.

Gulf Premiums Drive Costs

Gulf crude is becoming increasingly expensive for Indian buyers. Suppliers are seeking premiums of $3-$4 a barrel over the Dubai-Oman benchmark, while the Dubai-Oman index itself is trading at a $6-$7 premium to Brent.

This effectively puts the cost of Gulf crude for Indian refiners at around $10 a barrel above Brent.

Saudi Aramco's official selling prices offer some relief, with crude priced $1.5-$3 a barrel below the Dubai-Oman benchmark. However, shipping disruptions in the Red Sea and Strait of Hormuz have sharply reduced the availability of vessels willing to transport term-contract cargoes.

As a result, Indian refiners are increasingly turning to the spot market to secure Gulf supplies. Traders, including trading arms of Gulf national oil companies, are demanding higher premiums to compensate for the risks involved in moving cargoes through conflict-affected waters.

Industry executives said some shipments are being transported using dark fleets and ship-to-ship transfers. Although term-contract crude remains available on a free-on-board (FOB) basis, the shortage of vessels willing to enter ports in conflict zones is restricting physical deliveries.

Alternative Sourcing Strategies

West African crude, another important source for Indian refiners, has also become more expensive. One industry executive described the economics of some West African grades as increasingly unattractive.

Indian refiners are therefore exploring supplies from the US, Brazil and Guyana to offset reduced availability of Gulf crude and avoid high West African premiums.

Russian oil, however, remains an important source of supply, with shipments expected to continue through September.

The current market marks a sharp reversal from early July, when Brent spot prices had fallen below $70 a barrel following a 60-day US-Iran truce.

The temporary easing of tensions allowed crude stranded in the Persian Gulf to enter global markets, easing supply concerns.

The increase in available supplies also widened discounts on Russian and Venezuelan crude, giving Indian refiners greater room to secure cheaper barrels.

That advantage has now diminished following the expiry of the truce on August 17.

Sanctions Add To The Risk

Indian refiners could face another challenge if Washington further tightens sanctions targeting buyers of Russian crude.

The US Senate recently passed legislation proposing tariffs of up to 100% on India, China and other buyers of Russian oil. If implemented, such measures could make Russian crude more difficult and expensive for Indian refiners to procure.

With Gulf supplies already constrained and alternative grades carrying higher premiums, tighter sanctions could further disrupt global crude flows and add upward pressure to oil prices.

For Indian refiners, the combination of rising benchmark prices, shrinking discounts and elevated freight and geopolitical risks is rapidly eroding the cost advantage that had supported crude procurement in recent months.