As Saudi Aramco profit surges, will Saudi Arabia cut the crude oil price for Asia as a gesture of goodwill to the region?

 

Saudi Aramco profits surges

Sources in the Middle East speculate that Saudi Arabia may bring the crude oil price down for Asia once more, exactly as it did during the first wave of the pandemic.

Saudis may have taken into account the significant drop in demand from the region in the first quarter of this year: the crude oil imports by India, for instance, have fallen by 11.8%, compared with the same during the same period last year; in March, this year, the relationship between India and Saudi Arabia soured over the production cuts while India turning to alternate sources for its imports.

Being true to its threats, India turned to the US and the latter became the second largest supplier of the crude oil to the former. With this development, Saudi share of the Indian market fell by 42% while the US share went up 48% in February this year.

Indian authorities, meanwhile, were making plans to diversify its sources of crude oil from the Middle East; they were focusing on Iran, Venezuela, the US and even some African countries.

With the deadly outbreak of the Coronavirus in India during the last two weeks, the relations between the former allies, Saudi Arabia and India, appeared to have improved; the Kingdom made some contribution to getting oxygen supply in India on track in its hour of need.

Against this backdrop, the Saudis may have taken into account the toll taken on the India economy by the resurgence of the Coronavirus.

In addition, the imminent entry of Iran into the crude oil markets as a normal trader must have played a role too in the thinking behind the calculations.

In Japan too, the demand of crude oil must have suffered in proportion to an increase in infections; Japan is the world’s fourth biggest importer.

In the rest of Asia too, there are clusters of infections mushrooming in the last few weeks; the situation, however, is not as bad as what is happening in India.

In this context, the regional bodies may have asked Saudi Arabia to take stocks of the situation; although it has agreed in principle to ease the production cuts from May to June in line with what is agreed upon in March at the OPEC+ meeting, the Saudis show their willingness to go the extra mile to help region at a crucial time.

It could be interpreted as a charitable gesture too, especially as this is the Ramadan season in the Islamic world; millions of workers from the Asian region make an immense contribution to Saudi economy at present in very difficult circumstances.

If confirmed officially, the Saudis are in a better position to go ahead with the price move for Asia: the Saudi Aramco, world’s biggest oil company, announced today that its profit has gone up by 30%; it’s a remarkable achievement given the lingering volatility in the oil markets.

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