Following the OPEC+ decision to roll over the production cuts into April, India is asking its state-owned refiners to aggressively look to diversify imports away from the Middle East, as the world’s third-largest oil importer isn’t happy with the tighter oil market and higher oil prices.
“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 government source told Reuters this week.
Last week, the OPEC+ group surprised the market by deciding not to lift collective oil production from April, leaving only small exemptions to Russia and Kazakhstan, as it did in its January meeting. So from April, not only will the alliance, for the most part, keep production unchanged—with the exception of Russia boosting output by 130,000 bpd and Kazakhstan by 20,000 bpd—but Saudi Arabia will also keep its extra 1-million-bpd cut into April.
India, which relies on imports for more than 80 percent of its consumption and whose imports from the Middle East account for around 60 percent of all foreign shipments, has been displeased with the OPEC+ oil supply management since the beginning of the year, unhappy that high oil prices are lifting its import bill and domestic inflation.
Currently, OPEC heavyweights Iraq and Saudi Arabia are India’s number-one and number-two source of supply, respectively. Related: $70 Oil May Cause Slowdown In Demand Recovery
Diversification plans could include buying more oil from the United States and imports from Guyana, the newest oil producer, according to Reuters’ sources.
After OPEC+ decided to extend the cuts, Indian Petroleum Minister Dharmendra Pradhan said India was concerned that the OPEC+ decision not to lift oil production in April could hurt the consumption-led recovery in oil demand.
This was not the first time India had shown its displeasure with the current OPEC+ policies to tighten the oil market. Earlier last week, India called on the OPEC+ group again to boost production, saying that it does not support “artificial cuts to keep the price going up.”
By Tsvetana Paraskova for Oilprice.com
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The United States can’t supply India with much oil since it needs every single barrel of oil to satisfy domestic demand particularly with rising US oil imports as a result of a steep decline in US oil production. Moreover, US crude won’t be cheaper than Middle East oil. As for Guyana, it is a non-starter.
India could buy a small quantity of US sanctioned Venezuelan crude but this will only satisfy a small percentage of its needs.
With an estimated 80% dependence on oil imports of which 60% coming from the Middle East, India is stuck with Middle East oil imports.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London