The shutting down of the East-West crude oil pipeline by Saudi Arabia–accounting for roughly 4 per cent of global supply–is likely to make barrels more expensive.
The closure of the 1,200 km long pipeline, which transports crude oil from Abqaiq to the Yanbu port on the Red Sea, is not expected to lead to major supply disruptions.
However, the disruption of roughly 4 million barrels per day (mb/d) of crude oil supply is further fuelling uncertainty that is reflecting in rising prices. By 1830 hours on Tuesday, Brent was trading at $106.1 per barrel, WTI at $102.3 and Murban at $120.8 a barrel.
Sources said that high crude oil prices coupled with a record weak Indian rupee against the US dollar will further inflate the crude import bill. For instance, India’s crude oil import bill is already higher by more than 56 per cent Y-o-Y at roughly $63.4 billion during April-July in FY27.
Kpler pointed out that closure of the Saudi East–West Pipeline further reduces routing flexibility for Indian refiners at a time when several key oil transit routes are already under pressure.
India will likely lean even more on diversification across Russia, the US, West Africa, Latin America and other non-Middle East sources to reduce exposure to any single corridor.
Higher import bill
Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling told businessline “The bigger risk for India is not only physical availability of crude, but the rising landed cost. Higher crude prices, freight, insurance and longer voyages all increase the delivered cost of barrels.”
For India, this means a higher oil import bill, more pressure on the current account deficit (CAD) and the Rupee, and a greater inflationary risk if elevated energy costs persist, he anticipated.
India’s CAD has risen to $11.2 billion during April-July this fiscal year against $6.6 billion during the same period in FY26. A $10 per barrel increase in crude prices adds about $13-14 billion to the import bill.
High energy prices have also started reflecting in rising inflation. Dharmakirti Joshi, Chief Economist at Crisil, said that the Consumer Price Index (CPI)-based inflation resurged to 4.8 per cent, reflecting a broadening of price pressures across both food and non-food categories.
Joshi emphasised that external risks are becoming more pronounced. Inventory depletion and persistent geopolitical tensions in West Asia have prompted Crisil Intelligence to revise its Brent crude forecast for FY27 upward to $88-93 per barrel, implying a 25-32 per cent on-year increase.
Pinky Yadav, Commodity Fundamental Analyst at Choice Broking, said that MCX crude oil prices rose around 2 per cent as escalating geopolitical risks and supply disruptions fuelled market volatility.
Continued shutdown of East-West pipeline following drone attacks, coupled with the abrupt postponement of regional diplomatic talks strained energy security. Tanker transits through the critical Strait of Hormuz (SoH) plunged to single digits. Heightened friction around the SoH, including reports of an exploding super tanker, further rattled investors, despite US President (Donald) Trump’s claims of an agreement between Moscow and Kyiv to cease strikes on energy infrastructure, Yadav added.
“There is also a potential impact on oil marketing companies (OMCs) margins and the government’s fiscal position if domestic fuel prices are not allowed to fully reflect the increase in international crude and freight costs. In short, diversification can reduce supply disruption risk, but it cannot fully offset the cost impact when several major oil routes are stressed at the same time,” Ritolia explained.
Russian crude oil remains particularly important. With multiple chokepoints facing disruption, Russian barrels routed through the Black Sea and Baltic become more valuable from a supply-security perspective, he added.