Indian Oil Corp (IOC), the country's biggest refiner and fuel retailer, has declared a force majeure on oil imports from some of its top oil suppliers, including Saudi Arabia, which has been promising a supply surge as of today in the price war it leads with Russia.
After India - population 1.3 billion people - went into a nationwide lockdown, IOC slashed refinery runs and declared a force majeure on imports from four key Middle Eastern suppliers-Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates (UAE), India's Economic Times reported on Wednesday, citing sources.
The top Indian refiner has asked these four suppliers to defer some of the cargoes they were set to deliver to India in April after the country went last week into a three-week-long nationwide lockdown, and demand for transportation fuel, as well as demand from businesses, craters. Saudi Arabia has not responded to IOC's request for deferral of cargoes yet, according to Economic Times' sources.
India, the world's third-largest oil importer, and key growth driver together with China, put a spoke in Saudi Arabia's wheel just as the Kingdom pledges to boost its oil exports to record-highs in the coming weeks.
The Saudis have discounted deeply their oil for April, aiming to grab market share from Russia, and from everyone else for that matter, after Moscow refused to continue playing ball in the OPEC+ production cut deal. Unfortunately for Saudi Arabia, there's no demand for its oil right now, regardless of how cheap it is. Major economies, including India's, went into lockdown to try to flatten the curve of the coronavirus spreading, which crippled global oil demand. Analysts expect 20 million bpd demand loss in the coming weeks-this would be a 20 percent drop compared to the world's 100-million-bpd typical oil consumption.
It's not only India that is not rushing to buy ultra-cheap Saudi crude because of plunging demand. Saudi Arabia has promised a flood of cheap oil to Europe as it aims to hit its former ally Russia in its own backyard, but it looks like demand for the ultra-cheap Saudi crude doesn't exist after all.
Despite the flood of cheap oil Saudi Arabia has promised, some refiners in Europe, including supermajor Shell, are set to take less crude from the Kingdom in April amid plummeting demand in the coronavirus pandemic, Reuters reported last week, quoting industry sources.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More