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India's state-owned refiners are ordering their regular volumes of Saudi crude oil for June after the Kingdom reduced its prices for the world's third-largest importer, Reuters has reported, citing unnamed sources familiar with the situation.
Saudi Arabia cut its official selling price for Asian clients earlier this month by between $0.10 and $0.30 in response to the surge in Covid-19 infections in India, which had a negative impact on its oil demand. Bloomberg noted this was the first price reduction of Saudi crude since December last year, reflecting weakening demand in the key Asian markets.
OPEC's largest producer announced oil 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. The following month, Asian refiners and traders had to pay $1.80 above the Oman/Dubai benchmark average for shipments of Saudi crude.
In response, India ordered its state-owned refiners to reduce their orders for Saudi crude in May and look for alternatives in continuation of efforts to reduce its overwhelming dependence on Middle Eastern oil.
"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," an Indian government source told Reuters in early March.
Now, Saudi Arabia has cut the price of its flagship Arab Light grade to $1.70 above the Oman/Dubai benchmark average. At the same time, Riyadh raised prices for U.S. buyers by $0.20 per barrel to reflect the U.S. economic rebound, which has pushed up demand for crude.
"This time there is no direction from the ministry to cut imports in June and unlike last time they (Aramco) have reduced the prices as well," one of Reuters' sources told the news agency.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.