Strategic oil reserves, Russian option cushion India amid Middle East crisis

New Delhi, Mar 1: With crude inventories sufficient to meet at least 10 days of requirements and fuel stocks covering another 5–7 days, India is unlikely to face any immediate disruption in oil supplies following the reported closure of the strategic Strait of Hormuz.

Officials said a short-term closure would have limited impact on India as refiners currently hold 10–15 days of crude inventories, both in storage and in transit, while fuel tanks are full and can meet 7–10 days of domestic demand.

“Indian refineries put together hold anywhere between 10 to 15 days of crude inventories, both in tanks and in transit. Besides, all their fuel tanks are full, which can easily meet 7-10 days of the country's fuel requirement,” an official said.

“For now, we think the closure of the Strait of Hormuz will not be very long," he added.

However, contingency plans are in place should tensions escalate. In the event of a prolonged disruption, India can recalibrate imports by tapping diversified supply sources, including increasing purchases of Russian crude.

Kpler vessel tracking data shows that 2.5–2.7 million barrels per day, roughly 50% of India’s crude oil imports, transit through the Strait of Hormuz, largely sourced from Iraq, Saudi Arabia, the UAE and Kuwait.

Nearly 60% of India’s liquefied natural gas (LNG) imports also pass through the route, primarily from Qatar and the UAE. India imports almost all of its LPG through the Strait, making cooking gas supplies particularly vulnerable to any sustained disruption.

Iran’s state media said on February 28 that the Islamic Republic had shut the Strait of Hormuz, one of the world’s most critical energy chokepoints through which about one-fifth of global oil and gas supplies transit, in response to the missile strikes.

The immediate fallout of the crisis is expected to be reflected in oil prices. Brent crude closed the week near seven-month highs at around USD 73 per barrel, rising roughly 16% since the start of the year.

Traders are bracing for heightened volatility, with some projections indicating prices could approach USD 80 per barrel if supply flows are disrupted.

Another official noted that global crude availability remains adequate and India can source oil from as far as Venezuela, Brazil and Africa if needed.

“India had cut purchases from Russia in response to US pressure, but we can go back to buying from Moscow in case there is disruption in the Middle East,” he said.

“The only question is transit time. It takes five days for a ship from the Middle East to travel to India, while it takes at least a month for those coming from Russia. So, it is a question of placing orders well in time," the official said.

Officials also pointed to India’s strategic petroleum reserves, which can meet about a week’s requirement, as an additional buffer.

The situation could turn more precarious for LNG if the closure is prolonged, as most LNG volumes are tied up in long-term contracts and only limited quantities are available on the spot market.

Prices may surge if major buyers like India or China seek alternative supplies. A similar vulnerability exists for LPG flows.

The government is closely monitoring the evolving situation and working on alternatives, a separate official said.

Sumit Ritolia, Lead Research Analyst, Refining and Modelling at commodity analytics firm Kpler, said while India’s recent pivot back to Middle Eastern crude has increased its near-term exposure to Hormuz-linked risks, the likelihood of a prolonged full blockade remains low.

“Diversified sourcing, Russian optionality and layered inventory buffers, including strategic petroleum reserves and commercial stocks, materially reduce the risk of sustained physical shortages. The principal near-term vulnerability is therefore price volatility and macro impact, not structural supply insecurity,” he said.

Brent futures settled at USD 72.87 per barrel on February 27 after touching an intraday high of USD 73.54, the highest level since July 30, 2025, with crude climbing more than USD 12 per barrel so far this year amid rising geopolitical tensions.

The assessment comes amid rapidly unfolding developments after military strikes by the United States and Israel on Iran, including Iranian state media reports of the killing of the Islamic Republic’s Supreme Leader.

PTI