Resurging virus sours India’s appetite for Saudi oil
(Bloomberg) --State-run refiners in India are looking to buy less crude from Saudi Arabia as demand in the Asian nation is poised to dip amid a resurgence of Covid-19, and relations between the two countries sour over prices.
Processors in the world’s no. 3 oil importer have sought to reduce May supplies by about one-third of their average monthly purchases, according to people handling the procurement of crude at these refiners.
Indian Oil Corp. and three other processors sent their requests, also known as nominations, to Saudi Aramco on April 5, said the people who asked not to be named due to company policy. Aramco is expected to inform customers of their allocations in the coming days.
India has become a vocal critic of the kingdom’s hawkish stance on oil prices and OPEC+ output policy in recent months, with mounting tensions prompting the country to seek alternative sources of crude. Saudi Aramco last week raised selling prices for all Asia-bound shipments despite an agreement by OPEC+ to gradually return more supplies to the market.
Energy demand in India is expected to weaken as Covid-19 infections continue to rise at an alarming rate, leading local governments to consider partial lockdowns and safe-distancing measures. Some refiners also have plans to shut their plants for maintenance work, thereby lowering India’s oil requirements in the coming months, the people said.
Petroleum product usage could shrink by as much as 20% over the next six months, they said, on top of the seasonal effect of the monsoon reducing fuel demand.
Oil consultant FGE will revise its demand estimates downward for the second and third quarters due to the possibility of curfews and travel restrictions in some high-risk states, said Senthil Kumaran, head of South Asia oil at the consultant. Saudi official selling prices are “too high”, prompting Indian refiners to diversify into other types of crude, he said.
About 86% of Indian oil imports last year were from OPEC+ members, with 19% coming from Saudi Arabia, according to government data. New Delhi has urged its processors to diversify suppliers, leading to refiners snapping up more cargoes from outside the Middle East.
