According to a few sources, public sector refiners in India, will buy 36% less oil from Saudi Arabia in May than usual, indicating escalating tensions with Riyadh, despite the Kingdom’s support for OPEC and allied producers’ proposal to boost output last week.As global oil prices have risen, relations between India, the world’s third-largest oil importer, the consumers, and Saudi Arabia have deteriorated.
As its economy recovers from the pandemic, New Delhi blames Saudi Arabia and other oil producers for raising crude prices.
According to a few sources, state-run refiners have placed orders for 9.5 million barrels of Saudi oil in May, down from the previously planned 10.8 million barrels.
The sources said that the decision to place fewer oil nominations was made on Monday, just two days after a phone conversation between Indian oil minister Dharmendra Pradhan and his Saudi counterpart Prince Abdulaziz bin Salman on Saturday.
The content of the discussion between the two ministers is unknown.
The Indian companies, Saudi Aramco, and the Saudi oil ministry all declined to comment on the situation.
On Thursday, after a new US Administration called on Saudi Arabia, the Group’s de facto leader, to keep the energy available to consumers, the Organizations of Petroleum Exporting Countries and its allies, known as OPEC+, agreed to reduce their oil yield gradually from May.
Saudi Aramco, the kingdom’s state-owned oil company, raised the official selling price, or OSP, of its oil for Asian markets on Sunday, while lowering it for European and American markets.
One of the sources said, “We were surprised when they announced cuts for other markets while raising OSPs for Asia.”
India advised refiners to look for energy alternatives to Gulf oil, which is the country’s primary crude source.
Tensions between the two countries have risen further after Abdulaziz advised India last month to use the cheap crude stocks, it purchased during the price slump in 2020. Abdulaziz’s response, according to Pradhan, was “undiplomatic.”
To calm the situation, Abdulaziz said last week that Aramco kept regular April oil supplies to Indian refiners, while reducing volumes for other buyers and that voluntary output cuts have put “Aramco in some difficulty with some of its partners.”
He also stated that Saudi Arabia will gradually phase out its additional voluntary cut by July.
Meanwhile, oil PSUs have begun diversifying their crude purchases to include Tupi grade from Brazil, Liza oil from Guyana, and Johan Sevredr up from Norway.
“We’ve always believed that crude supply should be determined by the market rather than managed artificially,” said Arindam Bagchi, a spokesman for the foreign affairs ministry, on Friday.
OPEC+ has announced slight ease in oil output cuts, but they are still far below India’s expectations, he said.
