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India will continue to prioritise crude oil imports based on the lowest landed cost as global supply disruptions push prices higher, with U.S. Secretary of State Marco Rubios visit bringing renewed focus on New Delhis energy security and its imports of Russian oil, Anindya Banerjee, Head of Commodities Research at Kotak Neo, said on Wednesday.
Speaking with ANI, Banerjee said Indias crude sourcing strategy would remain driven by energy diplomacy and commercial considerations, with refineries looking for the most cost-effective supplies amid tightening global availability. "So whenever we get the cheapest crude, which is on a landed cost basis, that's exactly from where we are sourcing," Banerjee said. His remarks come amid heightened attention to Indias Russian crude imports following Rubios visit and acknowledgments regarding the issue. However, global supply constraints have reduced the advantage of discounted oil, while disruptions around the Strait of Hormuz and damage to Russian energy infrastructure have added to market pressures. Banerjee said crude prices and transportation costs have risen sharply, increasing the cost of supplies for Indian refiners. "Brent futures are already at $110. The spot is at $10 to $15... premium to the futures, which means the landed cost, if I buy it today is $120 plus," Banerjee explained, noting that elevated freight charges add another $10 to $15. "So Brent, if I take the December futures as a benchmark, I think $100 to $120 looks to be the near-term range with an upward bias over the next, I would say, two, three weeks." The price pressure highlights the challenge for India, one of the world's major crude oil importers, in balancing affordable energy supplies with its diplomatic and strategic interests. Even when alternative supplies are available, the final cost depends on global benchmark prices, freight rates and the availability of crude. On the currency front, Banerjee said measures introduced by the Reserve Bank of India (RBI) in October had helped contain pressure on the rupee by keeping oil-related demand out of the open market. "That oil demand is out. So that's why we are not seeing a flare up in USD-INR in spite of the fact that the Brent crude is already above 110, close to $111," Banerjee stated. He said the rupee had remained within a relatively narrow trading range despite foreign institutional investor outflows of nearly USD 11 billion over eight weeks. "So since April of this year, we have seen a range between 94 on the down and 97 on the up. That will continue to be the range. Maybe the range has narrowed now because of the RBI measures. It's 94 till 96," he added. Looking ahead, Banerjee identified developments in West Asia and the U.S. presidential election as key factors that could influence commodity prices, currencies and global financial markets. "The US election on 3rd of November is going to be extremely important as it is... how things span out on West Asia after that. I think that will be the event to watch as far as the international triggers are concerned for commodities, for currencies, for global asset markets, everything," Banerjee concluded. On domestic fuel prices, Banerjee said the government and oil companies had so far absorbed the immediate impact of higher crude costs, despite some under-recoveries. He added that there were no official indications of an immediate increase in petrol and diesel prices. The evolving global supply situation and the cost of imported crude are likely to remain key considerations for India as it seeks to protect energy security while managing the impact of higher oil prices on inflation, the rupee and domestic fuel consumers. (ANI)
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