India’s crude oil basket surged to $103.33 a barrel on July 23, up 51.5% from $68.21 on July 3, when expectations of a US-Iran peace agreement had briefly cooled prices, renewing pressure on state-owned oil marketing companies facing losses.
“The latest surge is being reflected in September contracts. If crude remains elevated for another few weeks, it could put renewed pressure on oil retailers’ financial performance in the second and third quarters,” a senior executive at an oil marketing company said.
The July 23 level was 30.6% above July’s average of $79.10 a barrel and 24.2% higher than June’s average of $83.22. It was only 2.7% below May’s $106.23 and 9.7% lower than April’s $114.48.
Oil futures fell more than 3% on Friday but remained set for strong weekly gains amid worsening disruption to energy flows through the Red Sea and fears of further escalation in the US-Israeli war with Iran. Brent futures declined $3.59, or 3.57%, to $97.10 a barrel at 1240 GMT after settling above $100 in the previous session for the first time since May. The contract remained on course for a weekly gain of more than 10%.
West Texas Intermediate futures fell $3.14, or 3.41%, to $89.05 a barrel, but were headed for a nearly 8% weekly rise. The volatility followed claims by Iran-aligned Houthis that they had struck two Saudi oil tankers in the Red Sea.
Vanishing Discounts
The renewed spike comes after Hindustan Petroleum Corporation and Bharat Petroleum Corporation reported combined losses exceeding ₹14,000 crore in the June quarter, while their LPG under-recoveries crossed ₹7,000 crore.
BPCL Director (Finance) VRK Gupta told analysts on Thursday that markets had seen a brief period of stability in June, but the latest geopolitical developments had shown how quickly the operating landscape could change. The absence of discounts on Russian crude has added to concerns, although it continues to provide supply stability.
Officials are also watching disruption through the Bab el-Mandeb Strait, which could emerge as the next energy-security challenge. Any prolonged interruption could threaten crude supplies from Saudi Arabia and Russia while raising freight costs and global oil prices.
Analysts Warn
“If the conflict is contained to one month, Brent is likely to remain capped at around a $94 monthly average,” analysts led by Natasha Kaneva, head of global commodities research, wrote on Thursday. They cautioned that global inventory buffers were “finite”.
“Each additional month of disruption requires progressively larger releases from a shrinking pool of available barrels,” they said, estimating that every additional month could add $7-8 a barrel to Brent and lift its monthly average to around $114 if disruptions extend to three months.
Petroleum Minister Hardeep Singh Puri had said on July 2 that OMCs incurred losses of ₹74,781 crore on petrol, diesel and LPG sales up to June 30. The ministry estimated April-June under-recoveries at ₹19,905 crore on petrol, ₹1.44 lakh crore on diesel and ₹24,148 crore on LPG, taking cumulative under-recoveries to ₹1.88 lakh crore. Including previous-year LPG under-recoveries, the total stood at ₹2.1 lakh crore.
