India to buy oil from cheapest supplier; Saudi minister response ‘undiplomatic’: Dharmendra Pradhan

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March 26, 2021 6:17 PM

Retail petrol and diesel prices had hit record highs last month. Petrol crossed Rs 100 mark in some places in Rajasthan, Madhya Pradesh and Maharashtra.

"Certainly India has its own strategy when and how to use our own (strategic) storage and we are conscious about our interest," Pradhan said on Friday."Certainly India has its own strategy when and how to use our own (strategic) storage and we are conscious about our interest," Pradhan said on Friday.

With Saudi Arabia giving cold shoulder to its plea for easing production controls, India on Friday said it will buy oil from any country that will give it at cheaper rates and on favourable business terms.

Refiners in the world’s third-biggest oil importer are snapping up more cargoes from outside the Middle East in an attempt to diversify suppliers.

The US in February overtook Saudi Arabia to become India’s second-biggest supplier but that happened prior to the March 4 decision of the OPEC+ alliance to keep a tight rein on output.

Speaking at Times Network India Economic Conclave, Oil Minister Dharmendra Pradhan said India will keep its interests in mind while deciding on imports.

He termed Saudi Energy Minister Prince Abdulaziz bin Salman asking India to use oil it bought at rock bottom rates last year instead of egging producers to raise output to cool prices as an “undiplomatic answer” by a “close friend”.

“India will keep its interest in mind in deciding on its strategic and economic decisions,” he said. “We are a consuming nation and we will have to import energy for a long time. So whosoever gives up cheap, and easy, we will buy from them.”

Anyone supplying oil at cheaper rates is the priority. “Whichever country it may be… we have to do, we will do,” he said.

Pradhan had in the run-up to March 4 meeting of OPEC+ urged the producers’ group to ease production curbs to fulfill their promise of stable oil prices, saying rising international oil prices were hurting economic recovery and demand.

But even prior to the March 4 decision of OPEC+ to continue with output curbs, the?US had overtaken Saudi Arabia to become India’s second-biggest crude oil supplier behind Iraq in February.

Asked if the import trends in February were an indication of India preferring the US over Saudi Arabia, Pradhan said, “It is not an issue of we are going to be closer to who. The issue is who is going to serve our interest.”

Iraq, which is part of the OPEC, is India’s largest supplier, he said, adding UAE “is a very reliable partner” and there are off-take agreements with Kuwait and certain African countries.

UAE, Kuwait and Nigeria — some of the biggest suppliers of oil to India — are all OPEC members.

“We are an open, free market. Our oil marketing companies and private sector oil majors are free to take oil from any part of the world, whichever country will provide favourable business terms, whether it is America, or Iraq or UAE or Saudi Arabia. India’s common interest is paramount in decision,” he said.

On the Saudi minister’s statement after the OPEC meeting on March 4, Pradhan said “that was not a cold shoulder” to India’s demand for easing production curbs.

“That was a in a way undiplomatic answer by some of our close friend,” he said. “I politely disagree with that kind of approach.”

Responding to a question on India’s pleas, the Saudi minister at a press conference after the OPEC+ decision on March 4 had said that New Delhi should take some of the crude out of storage that it had purchased at very cheap rates last year.

“With regard to India, very simple. I would ask my friend that he withdraw some of the cheap oil that they bought in April, May and June (last year),” the Saudi minister had said. “There is an opportunity cost for not withdrawing it now.”

India had purchased 16.71 million barrels of crude in April-May 2020 and filled all the three Strategic Petroleum Reserves created at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. The average cost of that crude purchase was USD 19 per barrel, according to Pradhan’s written reply to a question in the Rajya Sabha on September 21, 2020.

“Certainly India has its own strategy when and how to use our own (strategic) storage and we are conscious about our interest,” Pradhan said on Friday.

Retail petrol and diesel prices had hit record highs last month. Petrol crossed Rs 100 mark in some places in Rajasthan, Madhya Pradesh and Maharashtra.

Rates would have gone up further as international oil prices rallied after the OPEC+ decision but oil companies hit a freeze button in February-end the moment assembly elections were announced in five states, including West Bengal, Assam, Tamil Nadu and Kerala.

After more than three weeks of status quo, petrol and diesel prices were cut on March 24 and 25 as international oil prices fell on prospects of speedy recovery in consumption getting clouded by the second wave of COVID-19 cases.

Petrol price was cut by 39 paise a litre and diesel by 37 paise in two days. Rates were unchanged on Friday as oil rebounded on concerns over the blockage of the Suez Canal.

Pradhan said prices have started to reduce and they are being passed on to consumers.

OPEC+, which is currently reining in about 7 million barrels per day of production — about 7 per cent of pre-pandemic supply — has helped engineer a nearly 80 per cent rise in the Dated Brent benchmark since November. Saudi Arabia has taken a voluntary extra 1 million bpd production cut in February and March.

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