Winter LNG Price Surge Threatens India's Energy Affordability As Global Supplies Tighten: Jefferies

India is facing mounting energy cost pressures as global liquefied natural gas (LNG) prices climb ahead of winter, even as the country records its highest-ever crude oil imports. Tightening international gas supplies, geopolitical disruptions and rising transportation expenses are threatening to increase India's energy import bill, with domestic affordability already stretched, according to brokerage Jefferies.

Spot LNG prices have increased 6 per cent week-on-week to $32 per million British thermal units (mmBtu), equivalent to approximately Rs 3,048 per mmBtu. European Union (EU) gas storage levels stand at 75 per cent, compared with 83 per cent during the corresponding period last year. Lower inventories could intensify competition for LNG cargoes as winter demand rises, keeping international prices elevated.

Jefferies warned that domestic gas affordability is already under pressure at current prices and expects global LNG prices to remain high through winter. This could increase the cost of imported gas for India, which depends significantly on overseas energy supplies.

The pressure extends beyond natural gas to crude oil. India's crude imports reached a record 5.6 million barrels per day (bpd) in October, reflecting strong refinery operations and efforts to secure supplies from multiple sources, according to energy intelligence firm Kpler.

Middle Eastern supplies accounted for approximately 2.3 million bpd, while Russian crude shipments remained strong at around 2 million bpd. However, Russian purchases could moderate in November and December as attacks in the Black Sea increase freight costs, making those supplies less competitive.

Despite a recovery in Middle Eastern exports to more than 90 per cent of pre-war levels, geopolitical disruptions continue to affect crude transportation. The physical crude premium rose 8 per cent week-on-week to $9 per barrel (around Rs 857), while freight rates remained nearly eight times their levels at the beginning of the conflict. Transportation costs now account for more than 25 per cent of landed crude costs, against around 3 per cent before the conflict.

The financial pressure is also visible in fuel marketing. With the Indian crude basket at approximately $118 per barrel (around Rs 11,240), Jefferies estimates that oil marketing companies are facing losses of around Rs 25 per litre on petrol and Rs 37 per litre on diesel.