Business Standard | India's new oil minister dials OPEC countries as higher fuel prices pinch

Jul 16,2021

India, the world's third-biggest oil consumer, has conveyed to OPEC countries its concern over high oil prices that are threatening to impact the nascent economic recovery after the devastating pandemic.

New Oil Minister Hardeep Singh Puri has made phone calls to key OPEC nations to convey the desire for an affordable price for consumers.

After calling his counterparts in Qatar and the UAE, he called Organization of the Petroleum Exporting Countries (OPEC) kingpin Saudi Arabia on Thursday evening.

"Had a warm and friendly discussion with His Royal Highness, Prince Abdul Aziz bin Salman Al Saud, Minister of Energy of Saudi Arabia on strengthening bilateral energy partnership and developments in the global energy markets," Puri tweeted.

Saudi Arabia, he said, is a central player in the international energy market.

"I conveyed my desire to work with His Royal Highness Prince Abdulaziz to bring greater predictability and calm in the global oil markets, and also to see hydrocarbons become more affordable," he said.

Saudi Arabia is the world's largest exporter of crude oil and India's second-biggest source after Iraq.

The discussions focused "on strengthening bilateral energy partnership and developments in the global energy markets," he said.

"Highlighted the crucial role of Saudi Arabia in rapidly growing energy needs of India in the coming years, and my strong desire to work with His Royal Highness to further diversify our bilateral strategic energy partnership beyond buyer-seller to see greater two-way investments."

Concerned over the rising oil prices, India has been reaching out to key oil producers in the Middle East.

Puri on July 14 called UAE Minister of Industry Ahmed Al Jaber, who is the chief executive of Abu Dhabi National Oil Co (ADNOC), seeking the UAE's support in lowering prices.

The rebound in international oil prices from lows hit in May on the back of demand recovery has sent petrol and diesel rates to a record high in India.

Petrol has crossed the Rs-100-a-litre mark in more than one and a half dozen states and union territories, while diesel is being sold at over Rs 100 a litre in Rajasthan and Odisha.

India, which imports 85 per cent of its oil needs, has long pressed producers' cartel OPEC and its allies, called OPEC+, to phase out its production cuts and allow oil prices to come to reasonable levels that support growth. It wants OPEC+ to stop propping up prices with its output cuts.

In March, Puri's predecessor Dharmendra Pradhan and Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman had an unpleasant exchange over oil prices.

To Pradhan blaming production cuts by OPEC+ members for the surge in oil prices, Prince Abdulaziz said India should take some of the crude out of the storage that it had purchased "very cheaply last year".

Days later, Pradhan termed the statement an "undiplomatic response from a friendly nation".

Since then, the petroleum ministry has asked refiners to look at sources outside of the Middle East for buying oil.

Puri, a former diplomat, is widely expected to smoothen flared tensions with oil-producing nations in general and Saudi Arabia in particular.

OPEC, Russia and several other allies in a production accord could not reach an agreement earlier this month on output quotas for August and possibly beyond.

Expectations were that the alliance may agree to raise production by 500,000 to 700,000 barrels per day but the decision was postponed as the UAE differed on the baseline for such output increase.

India is the world's third-largest consumer of crude and OPEC nations such as Saudi Arabia have traditionally been its principal oil source. But OPEC and OPEC+ ignoring its call for easing of supply curbs had led India to tap newer sources to diversify its crude oil imports.

As a result, OPEC's share in India's oil imports has dropped to about 60 per cent in May from 74 per cent in the previous month.

The two sides have somewhat patched up relations, with Saudi Arabia and the UAE supplying critical medicine, oxygen and equipment to help India battle its second wave of coronavirus infections.