InvestorQ : Why does India appear to be unhappy with Saudi Arabia on the OPEC supply front?
Lavanya Subramanian made post

Why does India appear to be unhappy with Saudi Arabia on the OPEC supply front?

Anamika Sodhani answered.
1 year ago

In a nutshell, India is unhappy because despite being the one of the largest markets for Saudi Arabian and Middle East oil. The oil minister, Dharmendra Pradhan, has expressed dissatisfaction that Saudi Arabia did not bother to take India’s inputs before finalizing its latest oil supply pact with the OPEC. As a result, India plans to reduce its oil orders to the Middle East. If it happens, it could be an unprecedented aggressive step by India.

PSU refiners including IOCL and BPCL plan to cut down on oil imports from Saudi Arabia by as much as 25% in May-21. Earlier this month, India had asked Saudi Arabia to go slow on supply cuts as it was creating a macro problem for the Indian economy. However, Saudi Arabia at that time had asked India to compensate their costs with the cheaper oil that they had procured earlier from the OPEC nations. That had left India feeling rather unhappy.

Saudi Arabia had actually ignored India’s call to boost OPEC supplies and control the crude price rally and that had apparently ruffled quite a few feathers in the oil ministry. This is also part of the government’s larger move to reduce dependence on Middle East crude. On previous occasions the state of volatility in the Middle East had posed a question mark over supplies to India and India wants to avoid that situation in future.

State owned refiners in India control 60% of India's 5 million bpd refining capacity and eve today they import nearly 14.8 million barrels of Saudi oil in a month. India is the world’s third largest oil importer and consumer but heavily relies on oil imports for 80% of its oil needs. OPEC plus Russia recently extended supply cuts into April. India feels that despite being such a large customer it was not give its due on policy matters.