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SAUDI ARABIAN OIL COMPANY

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Exclusive: Indian refiners deepen cuts to Saudi oil purchases in May - sources

04/06/2021 | 03:58am EDT
FILE PHOTO: India's Oil Minister Pradhan speaks on phone during an interview with Reuters in New Delhi

NEW DELHI/LONDON (Reuters) - Indian state refiners will buy 36% less oil from Saudi Arabia in May than normal, three sources said, in a sign of escalating tensions with Riyadh even after the Kingdom supported the idea of boosting output from OPEC and allied producers last week.

Energy relations between India, the world's third-biggest oil importer and consumer, and Saudi Arabia have soured as global oil prices spiked.

New Delhi blames cuts by the Saudis and other oil producers for driving up crude prices as its economy tries to recover from the pandemic.

State-run refiners have placed orders to buy 9.5 million barrels of Saudi oil in May, compared with the previously planned 10.8 million barrels, three sources said.

The refiners - Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp and Mangalore Refinery and Petrochemicals Ltd - normally buy 14.8 million barrels of Saudi oil a month.

The decision to place nominations for less oil was taken on Monday, within two days of a telephone conversation between Indian oil minister Dharmendra Pradhan and his Saudi counterpart Prince Abdulaziz bin Salman on Saturday, three sources said.

Contents of the conversation between the two ministers is not known. A source familiar with Saturday's conversation between the ministers said the talks were "positive".

The Indian companies did not respond to Reuters' requests for comment. Saudi Aramco declined to comment.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Thursday to a gradual easing of their oil output cuts from May after the new U.S. administration called on Saudi Arabia, the de facto leader of the producer group, to keep energy affordable for consumers.

On Sunday Saudi Aramco, the kingdom's state oil company, raised the official selling price, or OSP, of its oil for Asia while cutting it for Europe and American markets.

"We were surprised when they announced cuts for other markets while raising OSPs for Asia," said one of the sources.

India suggested that refiners look for energy alternatives to Gulf oil, its main source of crude.

Tensions between the two countries escalated further after Abdulaziz last month advised India to use the stocks of crude it bought cheaply during the price slump in 2020. Pradhan termed Abdulaziz's response as "undiplomatic".

To dial down the disagreement, Abdulaziz last week said that Aramco maintained normal April oil supplies to Indian refiners while cutting volumes for other buyers and conceded that voluntary output curbs have put "Aramco in some difficulty with some of its partners".

He also said that Saudi Arabia will phase out its additional voluntary cut in stages by July.

Indian state refiners, meanwhile, have begun diversification of purchases to include Brazil's Tupi grade, Guyana's Liza oil and Norway's Johan Sevredrup in their crude diet.

"We've always believed that crude supply should be market determined rather than artificially managed," Arindam Bagchi, spokesman for the foreign affairs ministry, said on Friday.

He said that even though OPEC+ has announced a slight easing of oil output cuts, they are still far below India's expectations.

(Reporting by Nidhi Verma; Editing by Lisa Shumaker and David Goodman)

By Nidhi Verma and Ahmad Ghaddar


© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BHARAT PETROLEUM CORPORATION LIMITED -0.16% 408.1 Delayed Quote.7.26%
HINDUSTAN PETROLEUM CORPORATION LIMITED 0.56% 232.7 Delayed Quote.6.20%
INDIAN OIL CORPORATION LIMITED -0.34% 87.8 Delayed Quote.-3.13%
LONDON BRENT OIL -1.00% 66.48 Delayed Quote.28.41%
MANGALORE REFINERY AND PETROCHEMICALS LIMITED 3.64% 37 End-of-day quote.4.37%
S&P GSCI GOLD INDEX 0.38% 1035.5149 Delayed Quote.-6.57%
SAUDI ARABIAN OIL COMPANY -0.14% 35.5 End-of-day quote.1.43%
WTI -1.51% 62.607 Delayed Quote.30.34%
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Financials
Sales 2021 1 224 B 326 B 326 B
Net income 2021 341 B 91 050 M 91 050 M
Net Debt 2021 303 B 80 824 M 80 824 M
P/E ratio 2021 20,8x
Yield 2021 3,99%
Capitalization 7 096 B 1 892 B 1 892 B
EV / Sales 2021 6,04x
EV / Sales 2022 5,54x
Nbr of Employees 79 000
Free-Float 1,76%
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Mean consensus HOLD
Number of Analysts 16
Average target price 33,95 SAR
Last Close Price 35,50 SAR
Spread / Highest target 9,86%
Spread / Average Target -4,37%
Spread / Lowest Target -32,4%
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Managers and Directors
NameTitle
Amin bin Hasan Al-Nasser President, CEO & Executive Director
Khalid Hashim Al-Dabbagh Senior VP-Finance, Strategy & Development
Yasir bin Othman Al-Rumayyan Chairman
Ahmad Abdul Rahman Al-Sa'adi Senior Vice President-Technical Services
Ziad Thamer Al-Murshed Vice President-International Operations
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