An LPG tanker, Sea Bird, carrying gas from Iran, is due to dock in Mangalore on Thursday and it could be the first of many ships bringing both crude oil and LPG into India from the embattled Middle Eastern producer.
The arrival follows a surprise move by the US government to allow the sale of Iranian crude already loaded and at sea, in an effort to cool energy prices which have soared due to the Middle East conflict.
The decision has opened a narrow buying window between now and April 19, when the US reprieve ends, that Indian refiners and fuel importers are now moving quickly to exploit. Industry players are predicting that India will be one of the biggest buyers in the coming weeks along with China.
“Market chatter around a potential return of Iranian crude to India is gaining traction. India could re-emerge as a key demand centre to watch, alongside Chinese buyers and other Asian importers,” says Sumit Ritolia, lead analyst at Kpler, a data and analytics company that tracks commodities and shipping movements.
There is a large pool of Iranian oil already at sea and, conveniently, much of it is within reach. Several LPG cargoes are also believed to be in nearby waters, meaning diversion to Indian ports could be relatively swift.
Analysts say the Iranian barrels and LPG cargoes could partially plug India’s supply gaps in the short term, especially in cooking gas, where inventories are thin.
The renewed interest in Iranian supplies is closely tied to severe disruption in the Strait of Hormuz, the world’s most critical energy waterway, amid the US-Iran conflict.
Tehran has allowed passage only to select vessels, including some linked to India, while attacks have made transit increasingly risky.
Oil prices have surged to above $100 a barrel, up from around $60 before the conflict. On Wednesday, benchmark Brent crude closed at around $102 dollars a barrel after volatile trading.
For India, which imports about 85 per cent of its crude oil and roughly half of its natural gas, the impact of the strait’s disruption has been immediate, with higher freight costs, delayed cargoes and mounting pressure on LPG availability. With no strategic reserves of cooking gas, additional cargoes from Iran could help ease the squeeze on supplies.
“We can see more cargoes coming from Iran, as the supply chain scrambles to secure more alternative cargoes as the Strait of Hormuz remains constrained and LPG supply remains a critical factor,” Ritolia says.
There is also a sizeable volume of crude already afloat, creating a fleeting opportunity.
“Currently, Iranian crude availability remains elevated, with an estimated 170 million barrels on water, including floating storage and cargoes in transit,” Ritolia says. “While part of these volumes are committed, a portion remains unsold, representing potential incremental supply.”
From an Indian access perspective, “around 2 million barrels are positioned near the Indian Ocean, 13 million barrels in the Arabian Sea, and 17 million barrels in the Middle East Gulf. These are volumes that Indian refiners could potentially secure,” Ritolia adds.
Several LPG cargoes are also believed to be in nearby waters, reinforcing the potential for quick diversion.
Still, significant hurdles remain. “Any uptake will depend on commercial considerations, including pricing structures, as well as the availability of payment, insurance, and logistics mechanisms,” Ritolia cautions.
Any escalation in the conflict – US President Donald Trump on Wednesday threatened to unleash “hell” on Iran if it refuses to accept it has been defeated militarily – or reimposition of sanctions could abruptly cut off Iranian supplies again.
The purchases could mark a return to a once-significant energy relationship between New Delhi and Tehran. “Historically, India was a major buyer of Iranian crude, importing significant volumes of Iranian light and heavy grades due to strong refinery compatibility and favourable commercial terms,” Ritolia notes.
At its peak, Iranian crude accounted for about 11.5 per cent of India’s total imports before US sanctions tightened in 2018. Imports ceased in May 2019, forcing refiners to pivot to suppliers in the Middle East, the US and later Russia.
“Diversification, executed at the right time and with speed, is becoming the defining factor in today’s energy markets, with energy security now taking centre stage,” Ritolia says.
Iran, meanwhile, has signalled there is little prospect of an end to the hostilities soon, with foreign minister Abbas Araghchi warning that any ceasefire lacking firm guarantees of no further attacks would fail to halt the war.