Saudi Arabia raises oil price for Asia, reduces for Europe and the US - big blow to India

 

Saudi arabia increases oil price for Asia

The disagreement between Saudi Arabia and India over the production cuts of crude oil took yet another twist today when the former increased the price of oil, known as OSP, the official selling price, for Asia while bringing it down for the US and Western Europe.

The main customer block for Saudi Arabia has been in Asia for years; yet the price hike comes at a time when the region is struggling to cope with the multitude of consequences due to the pandemic; in addition, there are signs that the region may slide into a third wave of the pandemic.

The kingdom, however, does not seem to be looking at the economic prospects of the region from the pandemic perspective. On the contrary, it sees the potential for growth in the region outweighs the hypothetical inhibitions against the same.

Aramco, the world’s largest oil company that is owned by the Saudi government, plans to increase all grades of crude for Asia by 20 – 50 cents from May.

The price of all grades to Western Europe will remain unchanged whereas the Arab light for the region will be reduced by 20 cents. Most grades of oil for the US, meanwhile, will be down by 20 cents.

Although Saudi oil minister insisted that the unexpected phone conversation with his US counterpart on the eve of the recent OPEC+ meeting, it’s clear that the conversation has produced something in favour of the US interests.

As for India, the price hike is major blow, both diplomatically and economically; it will cause reverberations across the political domain too.

Indian oil minister has been vehemently opposing the production cuts for months and even issued thinly-veiled threats that they would look for alternatives elsewhere.

Having been true to his words, in February, the US became the second biggest crude oil exporter to the world’s third largest consumer.

Turning its back on the Middle East suppliers, especially Saudi Arabia, however, is easier said than done: the combination of the proximity, shipping cost and above all, the reliability of consistent supply still makes the Middle East as the best option for India as far as its crude oil imports are concerned.

In this context, it’s interests of both countries that up until the oil issue came up, used to enjoy mutually beneficial pragmatic relations, to tone down the war of words at ministerial level. It certainly is good for the region too for various reasons, as volatility in any form is in no one’s interest.

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