The decision comes even after the Kingdom supported the idea of boosting output from the OPEC and allied producers last week.
Relations between the 2 nations have soured in the past few months as domestic prices of fuel spiked following repeated output cuts by the Saudis and other oil producers, thereby putting an upward pressure on crude prices.
Crude oil suppliers to India:
- In February, the United States accounted for 14% of India's crude oil imports.
- While oil imports from Saudi declined sharply by 42% in the same month.
- Iraq was India's biggest crude oil supplier at 8,67,500 bpd, followed by the U.S. and Nigeria.
- UAE and Kuwait are also some of the biggest suppliers of oil to India
The oil ministry had already urged domestic refiners to speed up their diversification of crude resources and reduce dependence on Middle East.
According to the Petroleum Planning and Analysis Cell data, India's oil imports in February fell 18.3% from a year earlier to 15.24 million tonnes, the biggest year-on-year fall since October 2020.
India has already curbed its reliance on the Middle East from more than 64% of imports in 2016 to below 60% in 2019.
However, that trend reversed in 2020, when the pandemic pummelled fuel demand and forced Indian refiners to make committed oil purchases from the Middle East under term contracts, shunning spot purchases.
Tensions between the 2 countries further escalated after Saudi energy minister Abdulaziz last month advised India to use the stocks of crude it bought cheaply during the price slump in 2020.
Indian Energy minister Dharmendra Pradhan termed Saudi Arabia's response on India's strategic oil reserves as «undiplomatic» and said that the country is conscious about its interest.
Saudi Aramco raised the official selling price (OSP) of its shipments to Asia in May, but left the price for Europe unchanged.
The OSP revision came amid the government asking state refiners to cut Saudi oil imports and, in a throwback to 2014-15, use their collective clout to negotiate better contracts.
For Indian refiners and much of other Asian buyers, which accounts for 60% of India’s oil imports, is hard to beat as a cost-effective source because of proximity, low shipping costs, capacity to supply committed quantities.
Joint procurement is also a non-starter because of the individual need of each refiner.
For the same reasons, the US will not always be a cost-effective source, though it has become the 2nd-largest supplier as India diversifies sources.