Aramco closes supply tap for Indian refiners

Saudi Aramco has halted crude supplies to Indian refiners after attacks on its East-West pipeline, according to sources familiar with the situation. The supply interruption comes as oil prices have surged, with Brent futures trading near $108 a barrel on Wednesday. The pipeline, a crucial alternative route for Saudi crude following the disruption of the Strait of Hormuz, had been supplying around 9% of India's crude imports since the onset of the war.

While finding replacement barrels is not expected to be a major issue, the challenge lies in rising prices and freight costs. Aramco has stopped all supplies through both the Red Sea and the Strait of Hormuz, although it has sold some spot cargoes to traders expected to deliver smaller volumes through Hormuz. Indian refiners are confident of finding alternative barrels but will have to pay higher prices due to increased oil benchmarks and the disappearance of discounts on Russian crude.

Analysts warn that refiners could face higher crude costs and freight rates as they replace Saudi supplies, amid rising tanker rates and dwindling global inventories. The conflict involving Saudi Arabia and Houthis could also increase risks to energy infrastructure, making supplies less predictable.