Urals crude premiums ease in India as weak margins curb buying

• Urals crude premiums dropped from $6-7/barrel in May to $2-4/barrel for June deliveries to Indian ports, reflecting reduced refiner demand amid margin pressures
• India's fuel demand fell 4.6% year-over-year in April as high crude and fuel prices create economic pressure, with the government keeping domestic petrol prices unchanged
• Despite the premium decline, Urals is unlikely to return to a discount in the near term as the Iran war has disrupted tanker traffic through the Strait of Hormuz, limiting Gulf crude availability across Asia

Summary: Urals Crude Premiums Ease in India as Weak Margins Curb Buying

Key Development:

Premiums for Russian Urals crude oil delivered to Indian ports have declined significantly due to weak refining margins prompting refiners to reduce purchases. June-delivery Urals is trading at a $2-4 per barrel premium to Brent, down from $6-7 per barrel for May cargoes.

Market Context:

Urals has traded at a premium to Brent in Indian ports since early March following U.S.-Israeli disruptions to oil flows through the Strait of Hormuz. Despite the current decline, traders indicate premiums are unlikely to return to discount levels in the near term due to constrained Asian oil supply resulting from the Iran conflict.

Supply Dynamics:

A virtual halt to tanker traffic through the Strait of Hormuz—a critical chokepoint for Middle Eastern oil exports—has severely limited Gulf crude availability, forcing Asian refiners to seek alternatives including Russian grades. This supply constraint continues to support Russian crude pricing despite weaker demand.

India Impact:

As one of the world's largest oil importers, India faces economic pressure from elevated crude and fuel prices. The government has maintained domestic petrol prices unchanged despite market volatility. India's fuel demand fell 4.6% year-over-year in April. Prime Minister Narendra Modi announced fuel conservation measures on Sunday as surging global energy prices strain the country's foreign exchange reserves.

Regional Effects:

Similar weakness is observed in China, where spot premiums for Russia's Far East ESPO Blend crude delivered in June have also declined due to weak refining margins dampening demand from independent refiners.