India to slash Saudi oil imports amid escalating standoff

India is planning to cut crude imports from Saudi Arabia by about a quarter in May. The decision comes amid a stand-off with Riyadh following oil cartel OPEC’s decision to ignore calls from New Delhi to help the global economy by increasing oil supplies.

In an exclusive report, the Reuters news agency quoted two Indian sources as saying the move was part of India’s efforts to cut dependence on Middle East oil.

Public sector undertakings Indian Oil, Bharat Petroleum, Hindustan Petroleum and Mangalore Refinery and Petrochemicals are preparing to lift about 10.8 million barrels in May, the sources said on condition of anonymity. Together they import an average 14.8 million barrels of Saudi oil per month, Reuters quoted the sources was saying.

Also read: India filled reserves with cheap crude after COVID crash, saved ₹5K crore

India imports more than 80 per cent of its oil needs and the government has been hit hard by rising oil prices and the pandemic-induced slowdown. Last year India had supported the decision of OPEC and its allies (OPEC+) to cut production in view of the collapse in demand for oil due to the pandemic.

But earlier this year, Dharmendra Pradhan, the minister for petroleum and natural gas and steel, called on OPEC+ to ease production curbs to fulfil their promise of stable oil prices. Pradhan blamed Saudi’s voluntary cuts for contributing to an increase in global oil prices. He said rising oil prices were hurting economic recovery and demand. OPEC+ decided this month to extend most cuts into April.

Also read: Are previous governments to blame for rise in petrol prices, as Modi said?

Responding to the Indian government’s request, Saudi energy minister Prince Abdulaziz bin Salman suggested India dip into strategic reserves filled with cheaper oil bought 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 minister said earlier this month. “There is an opportunity cost for not withdrawing it now.”

The petroleum ministry responded by asking refiners to speed up their diversification of crude sources and reduce reliance on the Middle East.

The Middle East’s share of India’s overall imports was already at a 22-month low in February. The same month the US emerged as the second biggest supplier to India after Iraq. Saudi Arabia, which has consistently been one of India’s top two suppliers, slipped to No 4.