Indian Oil Corp (IOC), India's largest refiner, plans to slightly reduce its crude oil purchases from West Asia under annual deals in 2027-28 because the Iran war has created uncertainty over supplies from the region, Reuters reported on October 21, citing a source familiar with the matter.

Source: Reuters via The Hindu BusinessLine

IOC had planned to source about 47% of its crude imports from West Asian producers under annual deals on a free-on-board (FOB) basis in the financial year ending March 2027. Indian refiners have traditionally relied on West Asia for more than half of their annual crude supplies, particularly heavier, high-sulphur grades, because of the region's proximity.

Why supplies have become uncertain

Disruptions as the Iran war enters its eighth month have forced Asian refiners to suspend purchases under some annual deals. Attacks on vessels transiting the Strait of Hormuz have constrained shipping availability and driven freight rates to near-record highs, according to Reuters reporting also carried by BOE Report and Baird Maritime.

Refiners have instead turned to spot purchases, with some producers offering crude on a delivered basis and absorbing part of the elevated freight costs to attract buyers. In recent months, IOC and other Indian refiners bought Iraqi oil sold at a discount to the Dubai benchmark on an FOB basis, the source said.

Indian refiners initially increased purchases of Russian oil to compensate for reduced West Asian supplies. Russian imports could ease in the coming months if more supplies become available through Hormuz and West Asian producers offer discounts on crude and freight to retain market share, the report said.

IOC has also paused a tender, issued in July, to buy a stake in at least two very large gas carriers after vessel costs nearly doubled to about $150 million for a 10-year-old ship since the tender was floated — yaani about ₹1,400 crore per old ship at current rates — underlining how shipping costs are reshaping India's energy procurement.