India looks at non-Opec options to tame oil prices
- India is the world’s third largest crude oil importer after the US and China. Hence oil producers cannot ignore India for long without losing their market share to other competing countries, the officials said
Unreasonable output curbs by oil producers’ cartel, the Organization of the Petroleum Exporting Countries (Opec), have forced India to negotiate alternative long-term supplies from outside the grouping such as the US and Russia amid soaring petrol and diesel rates in the country, two officials familiar with the matter said.
India is the world’s third largest crude oil importer after the US and China. Hence oil producers cannot ignore India for long without losing their market share to other competing countries, the officials said, requesting anonymity.
“Interestingly, even Russia (which is an outside ally of Opec in the cartel’s recent production cuts) is in touch with us for long-term crude supply contracts at concessional terms. We are actively considering the proposal,” said one of the officials, a key decision-maker on this matter. He, however, declined to disclose the commercial details.
Some other Opec members, including one from Africa, are also willing for long-term contracts, he said.
India is witnessing a spike in auto fuel rates due to rising international oil prices. Petrol on Sunday became costlier by ₹6.82 per litre and diesel by ₹7.24 a litre as their pump prices jumped for the 27th time in 48 days.
One of the key reasons for high domestic fuel rates is production curbs by the oil cartel, a second official said.
Opec and its allies, including Russia (together known as Opec+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output, a 10th of the global output, from May 1, 2020, but did not adhere to the planned supply restoration.
The output cut was initiated when international oil rates fell below $20 a barrel in April last year. Benchmark Brent crude on April 21, 2020 fell to $19.33 a barrel. It, however, rose to over $50 per barrel in early 2021. With rising demand and supply constraints, oil prices have now hit $74.39 a barrel on Wednesday (June 16, 2021), the highest since April 2019.
“Producers must not take consumers for granted. At the time of their crisis, we had supported them. Now it is their turn. If they do not relent, we will be constrained to reduce our imports from Opec counties and look for other opportunities such as spot buying and non-Opec producers,” the first official said.
Non-Opec suppliers produces about 60% of the world’s output, while the Saudi Arabia-led OPEC produces about 40% of global crude oil.