Strait of Hormuz uncertainty chokes crude imports: India’s oil stock down 15% since US-Iran war; here’s what it means

US-Iran war and the indefinite closure of the Strait of Hormuz has led to India’s crude oil inventories declining by around 15%. This decline is since the US-Iran conflict erupted in late February, as refiners continued operating at steady processing levels despite lower import volumes, according to estimates from commodities analytics firm Kpler.

However, analysts believe that if supply disruptions persist for an extended period, refiners may eventually have to scale back refinery runs or reduce crude processing activity. They say this could partly explain Prime Minister Narendra Modi urging citizens to conserve fuel.

According to the International Energy Agency, global oil inventories declined by 129 million barrels in March and dropped by another 117 million barrels in April.

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The agency warned on Wednesday that with global inventories already shrinking at a record pace, oil markets could witness further price volatility ahead of the peak summer demand season.

Drop in Crude Oil Stockpile

Kpler’s inventory data quoted in an ET report shows that India’s crude oil stockpile has dropped to 91 million barrels from 107 million barrels at the end of February. The estimates cover strategic petroleum reserves (SPR), refinery inventories and commercial storage, but do not include pipeline stocks.

India’s daily oil consumption stands at roughly 5 million barrels, meaning current inventories are sufficient for nearly 18 days of demand based on Kpler’s calculations.

The government, however, stated on Monday that existing crude reserves are enough to meet as much as 60 days of national consumption, though it did not provide detailed calculations. Sujata Sharma said on Thursday that the government’s estimate includes crude cargoes currently loaded on ships headed to India.

She added that pipeline inventories are also part of the government’s stock calculations.

India’s crude oil imports have averaged around 4.5 million barrels per day (mbd) over the last two-and-a-half months, down from nearly 5 mbd before the outbreak of the war, according to Nikhil Dubey, the lead analyst, refining, at Kpler.

Dubey told ET that the refinery operating rates have not fallen in proportion to the decline in imports, indicating that refiners are bridging part of the supply shortfall by drawing down existing inventories, most likely from refinery storage facilities.

He described the ongoing reduction in stockpiles as “moderate.”

According to an industry executive, the inventory depletion would likely have been steeper had Nayara Energy not carried out maintenance work at its 400,000 barrels-per-day refinery in Gujarat during April.

“With the possibility of the Strait of Hormuz reopening in the near term looking increasingly uncertain, India cannot depend on inventory drawdowns forever,” Dubey said.

He cautioned that refiners may eventually be forced to lower processing rates in line with reduced crude availability. “That could also be one of the reasons behind the Prime Minister’s recent appeal for fuel conservation,” he added.

The near shutdown of the Strait of Hormuz has reduced Gulf oil production by 14.4 mbd compared to pre-war levels. Global oil supply fell by an additional 1.8 mbd in April to 95.1 mbd, taking cumulative supply losses since February to 12.8 mbd.

While Saudi Arabia and United Arab Emirates managed to continue exports using alternative routes, Iraq and Kuwait, which are both heavily dependent on the Strait of Hormuz, were unable to ship any oil volumes.

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