India may struggle to replace disrupted crude supplies without incurring higher costs as Asian refiners compete for alternative barrels in a tightening global market, according to Zhuwei Wang, director of research & analysis at S&P Global Energy.
“India will unlikely to find alternative supplies without pushing costs higher as the country is competing with other Asian countries to find replacement barrels for Middle East crude,” Wang said, highlighting the risks to India’s supply chain amid escalating geopolitical tensions.
India has significantly increased its dependence on Russian crude since 2022, with around 35–40% of its crude imports now sourced from Russia, compared with less than 2% before before the outbreak of the Ukraine war. Russian oil imports to India had climbed to around 1–1.5 million barrels per day (bpd) in recent months as refiners capitalised on discounted supplies.
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However, shipments from Russia fell sharply after US sanctions announced in November last year, before stabilising somewhat following a recent US waiver allowing certain Russian cargoes to continue flowing to India.
Wang said replacing Russian or Middle Eastern crude barrels will not be straightforward.
High Cost of Diversification
Alternative supplies from West Africa, Brazil, the US, Canada and some Latin American grades often involve longer voyages, higher freight rates and, in some cases, lower refinery compatibility compared with Middle Eastern grades, which remain the mainstay for Asian refiners.
The warning comes as crude delivered to Asian markets crossed the $100 per barrel mark amid supply disruptions linked to tensions around the Strait of Hormuz, a key global energy chokepoint.
“Our base case is that Hormuz flows remain near zero until the end of next week and then gradually recover,” Wang said.
Even after shipments resume, restoring normal supply chains could take time.
“The Hormuz closure impacts not only flat prices but also supply chain efficiency once the Strait reopens, including restarting crude production, logistics, terminal congestion and refinery restarts. Normalising trade flows could take months,” he added.
India is expected to remain the fastest-growing oil demand centre globally, with demand projected to increase by 0.2–0.3 million barrels per day annually. In a tight supply environment, rising demand could intensify competition for available cargoes across Asia.
“Asian refiners including India have been struggling to replace Middle East crude and have started to cut refinery runs,” Wang said.
Strategic reserves and commercial inventories may help cushion short-term supply disruptions but do not fundamentally change the region’s structural dependence on imported crude.
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If Asian exporters reduce refinery runs to balance crude availability, about 11% of regional refining throughput—around 3.3 million barrels per day—could be cut, Wang said.
Competition for available barrels could intensify among India, China, Japan and South Korea, all major importers of crude. China is relatively better positioned due to its larger strategic petroleum reserves and pipeline access to Russia and Central Asia, while Japan and South Korea would rely more heavily on strategic and commercial inventories.
India’s strategic petroleum reserves currently cover about 9–10 days of imports, though they could potentially cover around 15 days of West Asia supply disruptions.
“The right response is both expand strategic and commercial stocking capacity and deepen diversification of routes and supply contract types,” Wang said.
Meanwhile, supply disruptions could also affect refining operations.
“Gross margins can look strong where feedstock is secure, but export volumes and run rates can fall if crude access tightens, sanctions complicate payments or shipping, or the government prioritizes domestic supply,” he said.
Managing Domestic Fuel Stability
In such a scenario, India’s refining sector may shift focus toward ensuring domestic fuel availability rather than maximising exports, he added.
TOPICSCrude oilThis article was first uploaded on March twelve, twenty twenty-six, at twenty-nine minutes past eight in the night.