- Surging tanker rates significantly inflate Indian refiners’ crude costs.
- Freight now adds $10-15 per barrel to landed crude.
- Global tanker fleet tightens from longer routes and sanctions.
For Indian refiners, the price of crude is only part of the bill. The cost of getting it onto a ship and across the water has climbed so sharply that it is now eating into refining margins by an estimated $10-15 a barrel, and that is before war-risk insurance is counted on some Gulf routes.
The squeeze comes as tanker rates surge across the Gulf, pushing the landed cost of West Asian crude in India to around $120 a barrel, according to Abu Dhabi-based commodity analyst Natalia Katona.
Dubai Crude at $110, Landed Cost in India at $120
Katona said the market’s habit of tracking benchmark crude prices when working out refined product crack spreads hides a large part of the picture. “Freight has become a major factor in refinery margins,” she said, reported Financial Express. “Market participants tend to focus on benchmark crude prices when calculating refined product crack spreads, but freight absorbs a substantial part of those implied margins.”
By her estimate, freight is now trimming margins by about $10-15 a barrel compared with what a calculation based only on crude prices would suggest.
Her landed-cost figure rests on Dubai crude trading at around $110 a barrel. The wider crude backdrop remains elevated: the Indian crude basket stood at $119.39 a barrel on 15 October and has averaged $122.01 so far this month.
Route by route: what freight now costs
The increase varies sharply by route, according to Katona’s estimates.
For cargoes loaded at Oman and Fujairah in the UAE, freight on a very large crude carrier (VLCC) to India’s west coast is currently $6-7 a barrel, compared with $2.60 before the war in the first quarter of 2026. To the Asia-Pacific region, the rate has risen to $30 a barrel, from $6.30 immediately before the war and $2.50 in the third quarter of 2025.
Oil loaded at ports inside the Gulf and moving through the Strait of Hormuz has seen a steeper rise. Leaving out war-risk insurance, VLCC freight to India’s west coast has jumped to $16 a barrel, up from $2.50 immediately before the war and $1.20 in the third quarter of 2025. The matching Asia-Pacific rate is now $37 a barrel, against $6.60 before the war and $3 in the third quarter of 2025.
Katona said Indian buyers are not at a disadvantage against their Chinese counterparts on these routes. “India is not paying higher freight rates than China on these routes,” she said, adding that the only exception would be barrels shipped from Russia’s Far East.
JP Morgan: Tanker Rates Doubled in September
A JP Morgan note, cited in the analysis, said freight rates on key West Asian crude routes and Atlantic deliveries doubled in September from levels that were already high in August. Shipping a VLCC cargo from West Asia to China has risen to around $35 a barrel from roughly $3 in early 2026, while the rate from the US Gulf Coast to China has reached $41 a barrel from $6.
“What began as a shortage of VLCC capacity in West Asia has therefore become a much broader tightening across the global tanker fleet,” JP Morgan said.
Longer Routes, Idle Tankers Squeeze Fleet
The numbers on fleet availability help explain why. Of the 923 VLCCs in the global fleet, 766 are in active use. Around 124 Iranian VLCCs, roughly 13% of the fleet, remain effectively unavailable to much of the international market because of US sanctions. Moving West Asian crude now takes an additional 15 VLCCs, 13 Suezmaxes and 10 Aframaxes compared with the 2025 average.
Katona estimated that 15-20% of the global VLCC fleet is tied up in and around the Gulf, as vessels shuttle crude to ship-to-ship transfer points, wait for incoming tankers or take longer routes. Saudi crude loaded from Yanbu is also being shipped around Africa, she noted, while Asian buyers are sourcing more barrels from North and Latin America.
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Majumdar: Longer Crude Routes to Keep Freight Elevated
Manas Majumdar, partner and leader for oil and gas, fuels and resources at PwC India, put the rise in VLCC freight to parts of Asia at around 50%, from $1.30 to $2.20 a barrel. On the benchmark he cited, India’s freight is around $0.80-0.90 a barrel, with China about a dollar higher.
Majumdar said tanker rates are likely to stay elevated as disruption stretches from Hormuz to the Red Sea, and as India increasingly buys crude from longer routes, including Russia, Africa and the Americas.
Tanker Attacks Increasingly Ending in Sinkings, Says Katona
On the risks, Katona was direct. “For sure, Hormuz remains the biggest risk for any crude producers and buyers,” she said. As traffic has picked up, she added, more tankers have been hit, and attacks are increasingly resulting in sinkings.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: abplive.com
