India looks to counter OPEC+ with new links -

India looks to counter OPEC+ with new links

The government has asked state-run oil companies to increase long-term import of crude from new suppliers such as Equatorial Guinea, renegotiate term contracts with Gulf-based producers, and rope in private refiners to collectively bargain better deals with oil producers, two officials aware of the matter said on condition of anonymity.

In order to negotiate better terms with oil producers, public sector oil marketing companies (OMCs) have been advised to leverage their collective bargaining power for long-term oil supply contracts and also rope in private refiners, the officials added. “Equatoria Guinea has a big oil discovery; one refiner has already lifted the first consignment. We are discussing to import more oil from there. Besides, focus is being shifted to the US and Latin America as the Gulf countries are resorting to cartelisation and unfair trade practices,” said a high-ranking official with direct knowledge of the matter.

“India is the third largest crude oil importer in the world. We have immense collective bargaining power. Only the need is to leverage this against the producers’ cartel,” he added.

India imports more than 80% crude it processes and in 2019-20 it imported 227 million tonnes of crude oil worth over $101 billion.

The oil producers’ cartel, the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as OPEC+) cut about one-tenth (9.7 million barrels per day) of global output in April 2020 when Brent crude plunged below $20 per barrel after demand plunged due to Covid-19 pandemic. In addition, Saudi Arabia cut output by 1 million barrels per day since February this year.

OPEC+, led by Saudi Arabia is, however, reluctant to restore output with demand recovery as the supply squeeze saw Brent soaring over 250% in about 11 months, a second official said. “Under US pressure, the cartel on Thursday agreed to raise some output from May, but that may not be sufficient to cool down prices,” he said. The squeeze saw Brent surging to around $70 a barrel on March 11, 2021.

“It is unfair to manipulate production to keep oil prices high. It is against the market principle. When oil prices plunged below $20, India had supported cartel’s decision of reducing production cut. Now, when demand is back, they must resume full production. Else consumers will shift to other producers and they [OPEC+] will lose their market share,” the first official said.

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