Opec ignores India’s call to ease production curbs
Saudi asks India to use cheap crude oil that it had purchased last year to cool rates
NEW DELHI: International oil prices rose after Opec and its allies ignored India’s plea to ease production control, with Saudi Arabia asking New Delhi to instead use oil it bought at rock bottom rates last year.
Brent crude, the most widely used benchmark, on Friday rose nearly 1% to $67.44 a barrel after the Organization of the Petroleum Exporting Countries (Opec) and its allies, known as Opec+, agreed not to increase supplies in April awaiting more substantial recovery in demand.
India’s oil minister Dharmendra Pradhan had in the run-up to Thursday’s Opec meeting urged the producers’ group to ease production curbs to fulfil their promise of stable oil prices.
He felt rising international oil prices were hurting recovery and demand.
Responding to a question on India’s pleas, Saudi energy minister Prince Abdulaziz bin Salman at a press conference after the Opec+ decision on Thursday said New Delhi should take some of the crude out of storage that they had purchased “very cheaply last year”. India had purchased 16.71 million barrels of crude in April-may, 2020 and filled all three Strategic Petroleum Reserves created at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. The average cost of that crude purchase was $19 per barrel, according to Pradhan’s written reply to a question in Rajya Sabha on September 21, 2020.
Retail petrol and diesel prices, which are at historic highs, should rise if the oil companies decide to pass on the surge in oil prices to consumers. Petrol and diesel prices have remained unchanged for the last five years and oil companies have not revised prices in the run to crucial assembly elections in 2017 and 2018 ahead of elections in Uttar Pradesh and Gujarat. West Bengal, Tamil Nadu, Kerala, Pondicherry and Assam go to the polls in the next few weeks.
Earlier this week, Pradhan had said India, where fuel demand is recovering to prepandemic levels, wants reasonable and responsible oil prices.
India, the world’s third-biggest oil importer and consumer, had supported the decision of the oil producers’ cartel Opec+ to cut production last year in view of the oil demand collapsing due to Covid.
“At that point, the producers especially Opec+ assured the global market, that by the beginning of the 2021 demand will be coming back and production will be as usual. But the production is yet to be normal,” he said. “If you do not supply properly if there is a gap in demand and supply artificially (created), there is a price rise.”
The average price of crude oil India imports was less than $ 50 per barrel between April and December 2020 and comparable to 2019-20 average rate of $60.47 in months thereafter but petrol and diesel prices are at historic highs now as the government has so far not rolled back the taxes it levied when prices plummeted almost a year back.
The record taxes coupled with international rates returning to pre-covid levels on resurrecting demand have meant that petrol has crossed ₹100 mark in some places in Rajasthan, Madhya Pradesh and Maharashtra.