HPCL shifts to delivered basis for crude sourcing amid volatile global market

Crude Sourcing Strategy

Hindustan Petroleum Corporation is buying more crude oil on a delivered basis rather than through free-on-board and term contracts due to volatile market conditions. Vikas Kaushal, Chairman and Managing Director of the state-owned oil-marketing company, described the current situation as a 'Wild West' during an investor call on Friday, October 23, 2026. Purchases on a delivered basis mean the seller pays for shipping costs and risks until the oil reaches the buyer's port. Mr. Kaushal noted that crude premiums fluctuate and oil can sometimes be picked up at discounts even when freight rates are high.

Shipping and Costs

Srividya Venkataraman, Director of Finance at Hindustan Petroleum, stated that freight costs doubled between the first quarter and the second quarter. Shipping costs on a Suezmax tanker rose to $9 per barrel from about $4 per barrel in June. Despite high freight rates, Mr. Kaushal explained that landed prices may not be as high as they appear because producers facing stranded oil often accept much lower net returns. The company is using delivered sourcing partly to avoid the risk of ships being attacked on the way, except when sending their own ship is cheaper. Ms. Venkataraman also reported that under-recoveries on liquefied petroleum gas were ₹245 per cylinder in October and are projected to reach ₹327 per cylinder in November, with total LPG under-recoveries for the September-end quarter reaching ₹500 crores. Additionally, Hindustan Petroleum holds combined petrol and diesel stocks for twenty days, excluding crude currently being processed in its refineries.

Context

Global crude oil supply chains often face disruptions and price swings due to geopolitical tensions and shipping route security concerns. Oil-marketing companies manage these risks by adjusting how they buy oil and balancing delivery costs against shipping hazards. Such tactical shifts help large refiners protect their profit margins when transport expenses change rapidly.