Indian refiners favor delivered crude in procurement shift as shipping costs mount
Indian state-run refiners are increasingly seeking crude on a delivered, or CIF, basis rather than on FOB terms, as geopolitical tensions drive sharp swings in freight and insurance costs, petroleum ministry officials and refiners said Oct. 26. Under CIF arrangements, sellers cover the cost and risk of transporting crude to the buyer’s destination. This allows ...
Indian state-run oil refiners are shifting their crude procurement strategy to delivered, or CIF, pricing as shipping expenses soar due to geopolitical tensions, according to petroleum ministry officials and industry sources. Under CIF agreements, sellers assume responsibility for transporting crude to the buyer's destination, providing refiners with a more stable landed cost and protection against sudden freight rate increases, which have spiked in the Gulf region due to vessel disruptions and attacks.
A senior refinery official stated that the company now buys crude on a delivered basis, rather than the traditional FOB terms, to secure a predictable cost structure and avoid unexpected freight hikes. Hindustan Petroleum Corp. Ltd., one of India's largest refiners, is increasingly considering purchased crude on a landed basis, except when it can send a vessel to collect shipments at a lower cost.
The company's chairman and CEO, Vikas Kaushal, noted that the market is currently volatile, making it difficult to predict how crude purchases will impact profitability. Refiners are now comparing delivered crude costs from suppliers worldwide to select the lowest landed-cost options instead of relying on FOB contracts and arranging shipping independently.
The shift reflects the refiners' reluctance to maintain fixed term-contract and spot-market procurement ratios amidst heightened uncertainty in the global crude market.
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