Through February, India’s petroleum minister Dharmendra Pradhan had been urging the ‘OPEC +’ group of oil producers to do away with production cuts and bring prices down. Not only did they fail to heed his request, the Saudi energy minister, Prince Abdulaziz bin Salman, even suggested that India use the cheap oil it had bought last year and kept in storage.
In retaliation, public-sector oil importers were instructed to reduce purchases from Saudi Arabia. Imports from the kingdom were reduced from 910,000 barrels per day (b/d) in December to 445,000 b/d in February. Indian media gloated that India had made up for the shortfall with increased purchases from the US—up from 260,000 b/d to 545,000 b/d over the same period—thus firmly putting the Saudis in their place.
This month, the Organisation of the Petroleum Exporting Countries (plus Russia), better known as OPEC +, decided to extend production cuts into April, with Saudi Arabia adding the unkindest cut by further reducing its output by one million barrels per day (mbd). India is now expected to deepen its cuts in Saudi imports from May onwards.
There has been extraordinary volatility in oil prices over the last year, largely due to the global economic collapse caused by the pandemic that reduced world demand. Prices (Indian basket) reached a low of $19.90 per barrel in April 2020, and, were still below $45 in November.
Production cuts by the OPEC+ in February pushed prices above $60; they briefly crossed $70 in early March, before settling at over $65.