The decision comes even after the Kingdom supported the idea of boosting output from the Organisation of the Petroleum Exporting Countries (Opec) and allied producers last week.
Relations between the two nations have soured in the past few months as domestic prices of fuel spiked following repeated output cuts by the Saudis and other oil producers, thereby putting an upward pressure on crude prices.
When Opec and its allies, known as Opec+ extended the production cuts into April, the Centre asked state-run refiners to cut imports from the Kingdom by about a quarter in May.
However, on April 1, Opec+ agreed to gradually ease their oil output cuts from May, after the new US administration called on Saudi Arabia, the de facto leader of the group, to keep energy affordable for consumers.
Crude oil suppliers to India
In February, the United States accounted for 14 per cent of India’s crude oil imports.
While oil imports from Saudi declined sharply by 42 per cent in the same month.
Iraq was India’s biggest crude oil supplier at 8,67,500 bpd, followed by the United States and Nigeria.
United Arab Emirates (UAE) and Kuwait are also some of the biggest suppliers of oil to India — are all Opec members.
State-run refiners have placed orders to buy 9.5 million barrels of Saudi oil in May, compared with the previously planned 10.8 million barrels, sources told Reuters.
India’s diversification drive
The oil ministry had already urged domestic refiners to speed up their diversification of crude resources and reduce dependence on Middle East.
According to the Petroleum Planning and Analysis Cell (PPAC) data, India’s crude oil imports in February fell 18.3 per cent from a year earlier to 15.24 million tonnes, the biggest year-on-year fall since October 2020.
India has already curbed its reliance on the Middle East from more than 64 per cent of imports in 2016 to below 60 per cent in 2019.
However, that trend reversed in 2020, when the pandemic pummelled fuel demand and forced Indian refiners to make committed oil purchases from the Middle East under term contracts, shunning spot purchases.
As India shifts gears again after Pradhan’s call for faster diversification, refineries are looking for new suppliers, the oil ministry official said.
Last month, the first cargo from new oil producer Guyana to India departed from a production facility off the South American nation’s coast in a vessel chartered by trading firm Trafigura, data from Refinitiv Eikon showed.
Pradhan termed Saudi’s response “undiplomatic”
Tensions between the two countries further escalated after Saudi energy minister Abdulaziz last month advised India to use the stocks of crude it bought cheaply during the price slump in 2020.
Union minister for oil, petroleum and natural gas Dharmendra Pradhan termed Saudi Arabia’s response on India’s strategic oil reserves as ‘undiplomatic” and said that the country is conscious about its interest.
Hit hard by soaring oil prices, the oil minister repeatedly called on the Opec and its allied to ease supply curbs. However, its plea was being overlooked.
Aramco raises oil price for Asia
World’s largest crude exporter Saudi Aramco raised the official selling price (OSP) of its shipments to Asia in May, but left left the price for Europe unchanged.
The OSP revision came amid the government asking state refiners to cut Saudi oil imports and, in a throwback to 2014-15, use their “collective clout” to negotiate better contracts.
For Indian refiners and much of other Asian buyers, West Asia, which accounts for 60 per cent of India’s oil imports, is hard to beat as a cost-effective source because of proximity, low shipping costs, capacity to supply committed quantities.
Joint procurement is also a non-starter because of the individual need of each refiner. For the same reasons, the US will not always be a cost-effective source, though it has become the second-largest supplier as India diversifies sources.
(With inputs from agencies)