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What Caused The Saudi-India Oil Rift?

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Marine • 19 hours 60.98 -0.24 -0.39% Murban • 19 hours 61.36 -0.68 -1.10% Iran Heavy • 19 hours 57.58 -1.37 -2.32% Basra Light • 19 hours 63.22 +0.69 +1.10% Saharan Blend • 19 hours 60.42 -1.20 -1.95% Bonny Light • 19 hours 60.60 -1.64 -2.63% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Bonny Light • 19 hours 60.60 -1.64 -2.63% Girassol • 19 hours 60.85 -1.58 -2.53% Opec Basket • 2 days 61.33 -0.37 -0.60% Click Here for 150+ Global Oil Prices

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Canadian Crude Index • 19 hours 49.14 +0.08 +0.16% Western Canadian Select • 15 mins 48.98 +0.13 +0.27% Canadian Condensate • 18 hours 58.33 +0.68 +1.18% Premium Synthetic • 18 hours 59.73 +0.68 +1.15% Sweet Crude • 15 mins 56.23 +0.03 +0.05% Peace Sour • 15 mins 55.33 +0.48 +0.88% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Peace Sour • 15 mins 55.33 +0.48 +0.88% Light Sour Blend • 15 mins 55.83 -0.32 -0.57% Syncrude Sweet Premium • 15 mins 59.33 -1.32 -2.18% Central Alberta • 15 mins 54.88 -0.27 -0.49% Click Here for 150+ Global Oil Prices

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Louisiana Light • 2 days 61.39 -0.24 -0.39% Domestic Swt. @ Cushing • 19 hours 56.50 +0.50 +0.89% Giddings • 19 hours 50.25 +0.50 +1.01% ANS West Coast • 3 days 62.20 -2.53 -3.91% West Texas Sour • 19 hours 29.00 -24.28 -45.57% Eagle Ford • 19 hours 33.00 -24.23 -42.34% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Eagle Ford • 19 hours 33.00 -24.23 -42.34% Oklahoma Sweet • 19 hours 56.50 +0.50 +0.89% Kansas Common • 2 days 49.50 +0.50 +1.02% Buena Vista • 2 days 65.67 +9.92 +17.79% Click Here for 150+ Global Oil Prices

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Home Energy Energy-General Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry

Home Oil Prices Rig Count Energy Energy-General Oil Prices Crude Oil Heating Oil Gas Prices Natural Gas Coal Company News Interviews Alternative Energy Nuclear Power Solar Energy Hydroelectric Renewable Energy Geothermal Energy Wind Power Fuel Cells Tidal Energy Biofuels Environment Global Warming Oil Spills Geopolitics Africa Asia Europe Indonesia International Middle East North America South America Video Breaking News Premium Articles Community Trade Now My Account Latest Discussions Energy General Oil Stocks & Prices Other Energy Topics Trade Now Get Exclusive Intel All Prices OPEC Blends Canadian Blends U.S. Blends WTI Crude • 10 mins Sell Buy 59.64 -0.13 -0.22% Brent Crude • 2 hours Sell Buy 63.16 +0.42 +0.67% Natural Gas • 10 mins Sell Buy 2.509 -0.011 -0.44% Heating Oil • 25 mins Sell Buy 1.802 -0.006 -0.31% Gasoline • 31 mins 1.947 -0.005 -0.24% Louisiana Light • 2 days 61.39 -0.24 -0.39% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Louisiana Light • 2 days 61.39 -0.24 -0.39% Bonny Light • 19 hours 60.60 -1.64 -2.63% Opec Basket • 2 days 61.33 -0.37 -0.60% Mars US • 40 mins 59.92 +0.44 +0.74% Gasoline • 31 mins 1.947 -0.005 -0.24% Click Here for 150+ Global Oil Prices

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Marine • 19 hours 60.98 -0.24 -0.39% Murban • 19 hours 61.36 -0.68 -1.10% Iran Heavy • 19 hours 57.58 -1.37 -2.32% Basra Light • 19 hours 63.22 +0.69 +1.10% Saharan Blend • 19 hours 60.42 -1.20 -1.95% Bonny Light • 19 hours 60.60 -1.64 -2.63% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Bonny Light • 19 hours 60.60 -1.64 -2.63% Girassol • 19 hours 60.85 -1.58 -2.53% Opec Basket • 2 days 61.33 -0.37 -0.60% Click Here for 150+ Global Oil Prices

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Click Here for 150+ Global Oil Prices

Canadian Crude Index • 19 hours 49.14 +0.08 +0.16% Western Canadian Select • 15 mins 48.98 +0.13 +0.27% Canadian Condensate • 18 hours 58.33 +0.68 +1.18% Premium Synthetic • 18 hours 59.73 +0.68 +1.15% Sweet Crude • 15 mins 56.23 +0.03 +0.05% Peace Sour • 15 mins 55.33 +0.48 +0.88% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Peace Sour • 15 mins 55.33 +0.48 +0.88% Light Sour Blend • 15 mins 55.83 -0.32 -0.57% Syncrude Sweet Premium • 15 mins 59.33 -1.32 -2.18% Central Alberta • 15 mins 54.88 -0.27 -0.49% Click Here for 150+ Global Oil Prices

Start Trading CFDs Over 2,200 Different Instruments

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Louisiana Light • 2 days 61.39 -0.24 -0.39% Domestic Swt. @ Cushing • 19 hours 56.50 +0.50 +0.89% Giddings • 19 hours 50.25 +0.50 +1.01% ANS West Coast • 3 days 62.20 -2.53 -3.91% West Texas Sour • 19 hours 29.00 -24.28 -45.57% Eagle Ford • 19 hours 33.00 -24.23 -42.34% Start Trading CFDs Over 2,200 Different Instruments Click Here for 150+ Global Oil Prices Eagle Ford • 19 hours 33.00 -24.23 -42.34% Oklahoma Sweet • 19 hours 56.50 +0.50 +0.89% Kansas Common • 2 days 49.50 +0.50 +1.02% Buena Vista • 2 days 65.67 +9.92 +17.79% Click Here for 150+ Global Oil Prices

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OPEC+ Was Wise To Ease Output Cuts Despite Demand Concerns OPEC+’s decision to ease output…

Demand Concerns Continue To Plague Oil Markets Oil prices rebounded on Tuesday…

Russia Slashes 2021-2022 Oil Production Forecasts Russia is slashing its estimates…

Home Energy Energy-General Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Share Facebook Twitter Linkedin Reddit Premium Content What Caused The SaudiIndia Oil Rift? By Irina Slav – Apr 07, 2021, 6:00 PM CDT Join Our Community A match has been going on in global oil, which has stayed largely out of the spotlight as the world focuses on the pandemic and its effect on demand. The match only recently garnered attention as the players dropped all pretense that they were not playing. Earlier this week, Saudi Arabia said it was hiking the official selling prices for its oil for Asian buyers. In response, India ordered its state refiners to reduce their purchases of Saudi oil. The game is on.

OPEC’s largest producer announced the price hikes for Asian buyers days after OPEC+ agreed to start adding barrels to their daily output, reducing a production curb that has had India repeatedly protesting against what it calls an artificial way of keeping oil prices high. Next month, Asian refiners and traders will have to pay $1.80 above the Oman/Dubai benchmark average for shipments of Saudi crude.

From one perspective, the Saudi move could be an attempt to keep revenues from its biggest market stable even if prices fall on the back of higher production, including from exempt OPEC members Libya and Iran, both of which are ramping up production.

From another, the move could be a warning to India to think twice before diversifying into other suppliers because price is not the only consideration when it comes to oil imports, Karunjit Singh from the Indian Express wrote in a recent analysis on the topic, citing energy experts.

This incident shows that there is not just the price of crude, but terms like shipping and flexibility of contracts which producers can push back on if importers try to diversify their source of supply,” said one India-based analyst as quoted by the Indian Express.

Related: OPEC+ Was Wise To Ease Output Cuts Despite Demand Concerns

And yet, in response to the Saudi price hike, New Delhi told its refiners to reduce their orders for Saudi oil for May, which they promptly did . Indian refiners will now buy 36 percent less Saudi crude next month than earlier planned. That would amount to some 9.5 million barrels in total for four big state-owned refiners: Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp, and Mangalore Refinery and Petrochemicals.

This compares with 10.8 million barrels planned to be purchased before the price hike, but it also compares with an average monthly import rate of 14.8 million barrels from Saudi Arabia for the four refiners. The ball seems to have landed in the Saudi court.

What the Kingdom has going for it is its proximity to India, which keeps the cost of shipping the crude there low. It is also flexible in terms of production as it has proved time and again when it feels threatened by a fellow producer, most recently—last year—Russia. The sheer size of its production capacity is also an advantage over smaller producers.

On the other hand, India—and the other big Asian oil importer, China—has the pick of the litter, and it’s a growing litter. Last year, for instance, India’s top oil supplier was Iraq, but the time this February rolled around, it had been replaced by the United States. The subcontinent is also importing crude from the Central Asian countries, Africa, and Latin America. This month, India also bought its first cargoes of Norwegian crude, from the Johan Sverdrup field, at a total of 4 million barrels, two to be delivered in May and two in June.

India is diversifying away from Middle Eastern—read Saudi—oil, and it has a good chance to score a big point against its opponent in the match, even if inadvertently in part: a rise in new Covid-19 infections on the subcontinent this week pressured prices. This rise couldn’t have come at a worse time for Saudi Arabia: some analysts saw the Saudi Asian price move as a signal of its confidence in the recovery of Asian oil demand. Indeed, demand has been recovering in both China and India—the world’s first- and third-biggest oil importers—but any news of a surge in infections is enough to reverse the positive effect of that recovery on oil prices.

Related: UAE Presents Phenomenal Plan To Boost Its Position As Oil Hub

Indian imports most of the oil it uses. At 80 percent, the share of imports in its consumptions is uncomfortably high. Of this total, however, as much as 60 percent comes from Middle Eastern suppliers—again, an uncomfortably high degree of dependence on a single, and united, group of producers.

“We have asked companies to aggressively look for diversification. We cannot be held hostage to the arbitrary decision of Middle East producers. When they wanted to stabilize the market we stood by them,” a New Delhi government source told Reuters in early March, noting India did not cancel any OPEC cargos last year despite the destruction of demand.

The spat shows how divergence between the interests of oil buyers and those of their suppliers has deepened amid the pandemic. This is by far not the first time Saudi-led OPEC has capped production to prop up prices, but India has not been so vocal in its opposition to such moves. Now, however, with economic recovery extra-fragile and the pandemic far from over, price sensitivity has boomed, it seems.

The good news for buyers such as India is that supply is ample and getting ampler: Guyana has joined the exporters’ club, and India already has plans to start buying oil from the newcomer. The bad news is that diversification will cost it higher prices, which, according to the government, will be worth it, ultimately.

The good news for Saudi Arabia is that its production prices are still lower than most other suppliers’. The bad news is that it may have used its price weapon prematurely, overconfident that India has few other import options. At some point, therefore, the Kingdom may have to choose whether it prefers a larger market share in the world’s third-largest importer of crude or whether it would bet on higher prices and fewer sales.

By Irina Slav for Oilprice.com 

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