The release of around 160 million barrels of crude oil stranded inside the Persian Gulf is widening discounts and easing conditions in the physical oil market, creating a more favourable procurement environment for Indian refiners after months of acute supply tightness triggered by disruptions in the Strait of Hormuz.

Several West African crude grades from Angola and Congo are now trading at discounts of $4-11 a barrel to Dated Brent, while key Middle Eastern benchmarks — including Oman, Dubai and Murban — have also slipped into deep discounts. The shift marks a sharp reversal from the exceptionally tight market conditions witnessed in March and early April.

According to HSBC, Gulf crude and petroleum product exports have climbed from less than 2 million barrels per day (bpd) in May to more than 9 million bpd in recent days as laden vessels delayed by the disruption began clearing the region. The nearly 7 million bpd increase is reaching the market faster than refiners can absorb through higher demand, increased refinery runs or inventory replenishment.

The stranded stock, estimated at 160 million barrels as of June 17, comprises around 90 million barrels of non-Iranian oil and 70 million barrels of Iranian crude. At a release rate of 8-9 million bpd, the backlog represents nearly 20 days of supply and could be exhausted in roughly two weeks.

HSBC said the surge had created a short-term “mini-glut”, even though the underlying market is expected to remain in deficit during the third quarter. “The rate of change in supply is outpacing the rate of change in demand,” it said. The IEA estimates a third-quarter shortfall of around 1 million bpd, while the EIA projects a deficit of as much as 7 million bpd, based on a more cautious Hormuz recovery scenario.

The softer pricing environment comes after Indian refiners had already secured crude supplies by diversifying away from disrupted West Asian sources. Following a decline in Gulf imports in March, refiners stepped up purchases from Russia, the US, Oman, West Africa and South America.

“Indian crude imports have broadly returned to pre-conflict levels,” HSBC said. Russian crude was also trading at a modest discount to Brent, supporting purchases by Indian refiners. The broader sourcing strategy reduced India’s dependence on the immediate restoration of Hormuz traffic and helped limit the risk of refinery feedstock shortages.

Japan and South Korea, which remain more reliant on Gulf crude than India, experienced steeper declines in imports during the initial phase of the disruption and drew on strategic petroleum reserves to bridge supply gaps. Indian refiners, by contrast, have shown limited appetite for additional West Asian cargoes, with many Asian buyers having already secured supplies for July and August. They also remain cautious about purchasing Iranian crude unless US sanctions relief is extended beyond August.

The Gulf rebound may not be sustained. ANZ Research said the initial surge in vessel movements had “dried up”, with “transits still in single digits, with no sustained recovery evident.” Multiple vessels reversed course after a June 25 attack near Omani waters, while mine-clearing and unresolved insurance requirements remain risks to shipping.

US strategic reserve releases remain elevated at around 1.3 million bpd, while oil held on water has declined to below 1.1 billion barrels, ANZ said. It also noted that the Brent prompt spread remained compressed at around $4 a barrel.

The relief in crude, however, has not fully extended to refined products. ANZ said gasoline inventories remain lean, while diesel and jet fuel cracks continue to trade at elevated levels. The market, it said, has shifted from “crude scarcity to refining scarcity”, with the constraint increasingly lying in the ability to convert available crude into transport fuels.

Once the stranded cargoes are absorbed and immediate selling pressure fades, HSBC said, “Brent could move back towards $80 a barrel or higher.”