Why India’s Crude Oil Basket Is Near $121 While Brent Futures Hover Around $105

International crude oil prices have been highly volatile, with Brent crude recently trading around $105 a barrel after touching about $108 earlier in the week. For India, however, the headline international futures price does not fully reflect the cost of the crude that refiners are buying for physical delivery.

The Indian Crude Oil Basket (ICB) was recently around $120.80 a barrel, creating a gap of roughly $15 a barrel with the quoted Brent futures price.

The difference does not necessarily mean India is simply paying $15 more than the international oil price. The two numbers measure different things: futures prices reflect crude for specified future delivery periods, while the Indian basket tracks the prices of physical crude grades imported by the country.

What Is the Indian Crude Oil Basket?

The Indian Crude Basket represents the average price of crude grades imported by Indian refiners.

According to data cited from the Petroleum Planning and Analysis Cell (PPAC), the basket for September comprises approximately:

Crude component	Share
Brent Dated	77.81%
Oman-Dubai	22.19%

This composition is important because the grades that Indian refiners actually purchase can command different prices from the benchmark futures contract being quoted in international markets.

Brent futures, meanwhile, represent contracts associated with crude delivery at a specified future period. The futures market can therefore incorporate expectations about how supply disruptions and geopolitical tensions may develop by the time that delivery takes place.

Why Is India’s Physical Crude More Expensive Than Brent Futures?

The current price gap reflects several factors, including the timing of physical deliveries, crude quality, freight, insurance and geopolitical risk.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, explained the difference by pointing to the distinction between what the futures market expects and what a refiner buying a cargo immediately has to pay.

“The futures market assumes this disruption eases. A refiner buying a cargo today does not get that assumption,” Banerjee said.

In other words, futures prices can reflect an expectation that supply disruptions will eventually ease, while physical cargoes available in the near term may carry a premium because supply is tighter today.

West Asia Disruptions Are Supporting Physical Oil Prices

Hareesh V, Head of Commodity Research at Geojit Investments, attributed the higher Indian basket to several factors, including India’s crude mix, stronger Dubai-Oman prices, freight and insurance expenses and supply concerns in West Asia.

The situation around the Strait of Hormuz is another factor cited by market analysts. Any disruption to one of the world’s key oil-transit routes can increase the risk premium attached to physical crude.

Disruptions involving Saudi Arabia’s East-West oil pipeline have also added to concerns over physical supply, according to the supplied report. Reports cited by the publication said Saudi Aramco had informed some Indian refiners that it could face difficulties meeting future supply obligations.

These developments can tighten the availability of physical Middle Eastern crude and increase the premium paid for immediate cargoes.

Freight Costs Are Adding to India’s Oil Bill

Transportation costs are another reason why the price of an imported physical cargo can differ substantially from a benchmark futures quotation.

Banerjee estimated that freight alone was adding approximately $18 a barrel to a supertanker cargo headed to Asia.

That cost ultimately affects buyers in the region, including Indian refiners. Insurance and other logistical expenses can add further costs when geopolitical risks increase.

This means that comparing India’s crude basket directly with a futures quotation without accounting for transportation, timing and crude quality can give an incomplete picture of the actual import cost.

Russian Crude Is No Longer Providing the Same Discount

Russian crude has historically provided Indian refiners with a significant price advantage compared with some alternative supplies.

Banerjee said Russian crude had been available to India at a discount of approximately $12 a barrel before the escalation of the US-Israel conflict with Iran cited in the report.

According to his assessment, Russian crude traded at a premium on several occasions in mid-September.

He described the change by saying:

“Russian oil is no longer cheap oil — it is simply another scarce barrel.”

If the availability of discounted Russian crude remains constrained, Indian refiners could face greater pressure to source alternative barrels at higher prices.

How High Could the Indian Crude Basket Go?

The analysts cited in the report outlined several scenarios rather than a single price target.

In a base-case scenario, Banerjee said the Indian basket could remain broadly within the $115–130 a barrel range if a Saudi ship-to-ship workaround operates and the affected pipeline is restored relatively soon.

Hareesh said the basket could remain above $120 if supply disruptions and other concerns persist.

A more severe scenario could push prices considerably higher.

According to Banerjee:

• $130–145 a barrel: possible if pipeline repairs are delayed and Strait of Hormuz constraints persist through October.
• $150–160 a barrel: a severe scenario involving prolonged pipeline disruption, further escalation around Hormuz and rapid displacement of Russian crude.

Hareesh also said a temporary move toward $150 a barrel was possible if conditions deteriorate further.

These are analyst scenario estimates, not guaranteed price levels.

Festive Season Could Increase India’s Oil Demand

The October-December festive period could add another source of pressure if domestic fuel consumption rises.

Travel, transportation and industrial activity typically increase around the festive period, potentially lifting demand for petrol and diesel.

Banerjee said petroleum consumption rose around 8% month-on-month last October, with diesel consumption increasing approximately 12% and petrol around 8%.

This year’s supply environment could make a similar seasonal increase more significant if global diesel availability remains tight.

The analyst also pointed to high diesel refining margins, Russia’s diesel export restrictions and relatively low petrol inventories at Chinese refineries as factors that could affect regional fuel supply.

Higher Fuel Demand Could Put More Pressure on Physical Crude

Stronger domestic consumption does not automatically translate into an equivalent increase in crude prices, but it can affect the balance between available refined products and crude demand.

Hareesh said stronger demand could improve refining margins and increase crude requirements, potentially putting additional upward pressure on the Indian basket if supplies remain constrained.

For India, higher domestic fuel demand could also reduce the amount of refined petroleum products available for export. Indian refiners would then compete more aggressively for physical crude cargoes to maintain production.

Why the $15 Price Gap Matters for India

The difference between Brent futures near $105 and an Indian crude basket around $120.80 highlights an important distinction in the oil market.

Brent futures are not the same thing as the cost of physical crude imported by Indian refiners.

The Indian basket incorporates the actual crude grades that India sources, while physical cargo prices can be affected by immediate supply conditions, freight, insurance, crude quality and geopolitical risk.

With India’s crude imports still exposed to developments in West Asia and changes in Russian oil availability, the domestic basket could remain elevated even if international futures prices do not return to their recent highs.

For now, the direction of the physical market will depend heavily on developments around supply disruptions, the Strait of Hormuz, Russian crude availability and the resolution of geopolitical tensions.