Oil minister Pradhan flexes India’s market muscle for better OPEC terms

NEW DELHI: India on Tuesday leveraged its position as the world’s third-largest oil consumer to seek better commercial terms from OPEC, the cartel of 14 oil exporting countries that accounts for 80% of the country’s oil imports.
At a meeting with OPEC secretary-general Mohammad Sanusi Barkindo here, oil minister Dharmendra Pradhan sought lower OSP (official selling price), credit period of 90 days against 30 days at present, freight discount and open credit based on credit worthiness of Indian state-run refiners who are the main importers.

Indian state-run refiners buy bulk of the crude under term contracts that follow the OSP set by the national oil company of the exporting country. The OSP is often higher for Asian customers ususally because of, among other reasons, a premium in the price markers generated from spot market of Dubai and Oman.
India has for long been demanding scrapping of the ‘Asian premium’, the existence of which OPEC has steadfastly denied and described it as a matter of market forces. Sources said Pradhan used OPEC’s own argument to underline the need for a “fair and responsible” pricing regime, saying it should be left to market forces of demand and supply.
In a veiled reminder of OPEC’s reduced clout in the global oil market, Pradhan used the recent incident of drone attack knocking out 50% of Saudi Aramco’s oil processing capacity — which resulted in oil prices spiking 20% intraday — to point out that Indian companies are working on alternate sources to widen the import basket to avoid supply disruption in case of any eventuality.
As a sweetener Pradhan offered investments into producing assets of OPEC member-countries as part of his strategy to transform India’s buyer-seller relation with OPEC into strategic partnership. He said the government was encouraging Indian oil companies to look for investment opportunities in producing assets.
He also appreciated OPEC member-countries for making up the loss of supplies from Iran due to US sanctions and the shortfall following the drone attack on Saudi Aramco’s facilities. He hoped against OPEC cutting production further, which will push up oil prices and hurt growth in consuming countries, including India. This in turn will pare demand and hurt producers. India is the fastest-growing fuel market, with demand growing at 5-6% annually.