Speculation rife over Saudi-India oil deal

Sources say talks had stalled pending agreement by companies on a price

Saudi Aramco and India’s Reliance Industries have not yet concluded a term contract to import diesel and gasoline, three industry sources said, fanning market speculation that the longstanding annual deal may not be renewed.

A deal has normally been signed by the first quarter, but negotiations have gone on longer at a time when Saudi Arabia has become less reliant on imports following refinery expansions.

The term deal talks had stalled because the companies had not been able to agree a price yet, said the sources who were familiar with the negotiations.

“Even if the Saudis don’t import from Reliance, Reliance will be able to sell in the domestic market due to firm summer demand and low underlying crude oil prices,” said one source.

Reliance and Saudi Aramco could not immediately be reached for comment.

While Saudi Arabia is the world’s top crude exporter, a lack of refineries to process crude into fuel products has meant the kingdom has traditionally relied on imports, largely from Asia.

But an industry source who supplies products to Saudi Arabia said a deal might not be reached since there was less logic this year on both sides and Reliance could use the barrels itself particularly given higher freight rates.

If no deal is reached, reduced demand from Saudi Arabia and continued exports from its new refineries would weigh on Asian diesel margins, which are down 26 per cent from the same period last year.