New Delhi, Apr 8 (PTI) India's energy outlook brightened on Wednesday after a fragile ceasefire between Iran and the US triggered a sharp drop in crude prices and reopened hopes of supply normalization through the world's most critical energy corridor.

India, the world's third-largest energy consumer and fourth-biggest gas user, imports about 88 per cent of its crude oil, around half of its natural gas requirements and roughly 60 per cent of its liquefied petroleum gas (LPG) needs, underscoring its heavy reliance on overseas supplies.

More than half of these crude imports, about 40 per cent of natural gas and as much as 85-90 per cent of LPG shipments are sourced from Gulf countries and transit through the Strait of Hormuz - the world's most critical energy corridor that was shut because of the West Asia conflict.

The US and Iran have agreed to a conditional two-week ceasefire that included the opening of Strait of Hormuz for shipping.

With energy supplies from Gulf countries impacted, India initially cut cooking gas LPG supplies to commercial establishments like hotels and restaurants but later restored 70 per cent of the pre-crisis supplies as alternative sources were tapped to replace the volumes lost in Strait of Hormuz.

Natural gas was initially cut for industries, including fertilizer plants, to meet full demand of CNG for transport and piped cooking gas in households.

Supplies to fertiliser plants - critical for food security - were partially restored, with operating urea units receiving about 80 per cent of their recent average consumption, while overall allocation to the sector was raised to around 90 per cent from early April.

This allocation has from Wednesday increased to 95 per cent, said Sujata Sharma, Joint Secretary in Ministry of Petroleum and Natural Gas.

Gas availability to other industrial and commercial users was also incrementally increased, though it remained below normal levels.

Also, city gas distributors were directed to prioritise piped natural gas (LNG) connections for commercial establishments such as hotels, restaurants and canteens, as part of a broader push to shift consumers away from LPG.

All this, using energy that Indian firms sourced from non-Gulf regions that involved longer voyages and higher freights.

The war led to a spike in international oil prices. Rupee fell about 7 per cent over the past year, making it one of Asia's worst-performing currencies, as rising oil prices inflated the import bill and increased demand for dollars. The currency's slide has compounded imported inflation, amplifying the economic shock from the conflict.

The ceasefire between the United States and Iran has raised hope of easing pressure on India's energy supplies. For one, oil prices fell sharply. Brent crude - the most traded globally plunged more than 15 per cent toward USD 90 per barrel.

Besides the sharp pullback in global oil prices, the truce has raised hopes of smoother tanker movement through Strait of Hormuz, which handles a significant share of India's energy imports.

Mukesh Mangal, Additional Secretary in Ministry of Ports, Shipping & Waterways, at a news briefing said priority will be to get the stranded Indian vessels out of the Persian Gulf before restarting energy trade.

"We are coordinating on the shipping move with Ministry of External Affairs (MEA)," he said.

As many as 16 Indian-flagged vessels loaded with liquefied natural gas (LNG), LPG and crude oil are stranded on the west side of the strait.

At the briefing, MEA spokesperson Randhir Jaiswal said New Delhi is hoping for unimpeded freedom of navigation after the ceasefire.

Asked about reports suggesting that Iran is seeking a fee for passage of vessels from the strait, he said, "we have had no discussion with Iran on this particular issue." Originally, there were 28 Indian-flagged vessels in Strait of Hormuz when the war in West Asia broke. Of these, 24 were on the West side of the strait and four on the East side. Eight vessels from the west side and two from east have managed to sail to safety. Besides, foreign-flagged vessels with India-bound cargo are also struck in the Gulf.

Marine Traffic said:"Early signs of vessel activity are emerging in the Strait of Hormuz following a ceasefire announcement, which includes a temporary reopening of the strategic waterway to allow for negotiations." According to Marine Traffic data, hundreds of vessels remain in the region, including 426 tankers, 34 LPG carriers, and 19 LNG vessels, many of which had been effectively stranded during the disruption. PTI ANZ ANZ ANU ANU