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India, one of the world’s top oil consumers, has slammed OPEC for creating confusion with its latest decisions regarding oil supply, with many importers seeing their expectations of higher volumes disappointed.
In December, OPEC+ had agreed to start raising oil production by half a million barrels daily from this month. However, at the January meeting, the partners decided to roll over the current production level instead of adding another half a million bpd in February.
This coincided with Saudi Arabia’s unilateral decision to cut an additional 1 million bpd from its output. According to India’s oil minister Dharmendra Pradhan, as quoted by Bloomberg, this is a policy contradiction that has created confusion for oil importers.
In response, the secretary-general of OPEC, Mohammed Barkindo, assured Pradhan decisions were being made with consumers in mind.
This is not the first time India’s interests are at odds with the interests of its main supplier of crude oil. The Asian economy needs lower prices and greater volumes of oil, while OPEC needs higher prices and will adjust volumes to get them.
There is also the so-called Asian premium that Middle Eastern producers impose on their clients from the continent, which has also prompted complaints from Pradhan on numerous occasions.
Although their interests diverge, OPEC and India need each other: the Asian powerhouse is, together with China, the biggest driver of future oil demand growth. Besides, competition is intensifying with the U.S. joining the oil export scene, so India can pick from more sources as long as the price is right.
The subcontinent last year saw its oil demand drop for the first time in two decades because of the pandemic. However, by the end of the year, demand was already in recovery mode, led by greater fuel demand for people opting for personal transportation over public transit. With rising demand comes the rising need for imports, and now that India is not getting them because of OPEC’s price agenda, the discord could deepen.
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.