The relationship between India and OPEC is more important now than ever. Any lingering ill-feelings between India and Saudi Arabia from their spat over the price of crude earlier this year should be quickly cast aside, to focus on each other’s growing importance as consumer and supplier.
If OPEC needed a sobering reminder of India’s importance as a customer, it received it in the worst possible way: the resurgence of the coronavirus pandemic in the world’s third biggest oil importer.
India’s oil demand growth is set to be just 350,000 barrels per day (b/d) in 2021, according to S&P Global Platts Analytics, given extreme consumption weakness in April and May, with much pinned on a recovery later this year.
Given how hard India’s oil use has been hit by the second wave of the pandemic, Platts Analytics sees oil demand remaining below the 2019 level due to a poor first half of the year.
Meanwhile, if India needed a reminder of the importance of regular steady supply from the Middle East it only needs to look at the cybersecurity attack on the Colonial pipeline in the US or risks of tankers travelling long costly distances to deliver crude.
So, while India has told state-owned refiners to speed up the diversification of crude imports to reduce reliance on the Middle East, don’t expect big upheavals. Variety is important in supply security, but so is having strong bonds and crude grades refiners like.
A look at the data for the first quarter of 2021 reveals the Middle East continued to be the largest supplier of crude to India even though its share dropped by 2 percentage points to 59 per cent, due to India’s diversification drive
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