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 refiners to secure a more predictable landed cost and avoid exposure to sudden increases in freight rates, which have risen sharply amid disruptions and attacks involving vessels in the Gulf region, they added.

“We are buying crude on a delivered basis these days and not on FOB as we used to buy earlier,” a senior Indian refinery official told Platts, part of S&P Global Energy, on Oct. 26.

Since freight costs for crude shipments have risen sharply in recent weeks compared with previous months, refiners are increasingly concerned that an apparently attractive purchase could become uneconomical by the time it reaches an Indian refinery, the official added.

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