India complains about high oil prices to Saudi Arabia

Galtero Lara
May 18, 2018

Saudi Energy Minister Khalid al-Falih said he made a telephone call to his Indian counterpart, Dharmendra Pradhan, to discuss the situation in the global oil market.

He reiterated his commitment towards stable supplies and that "the Kingdom together with other producers will ensure availability of adequate supplies to offset any potential shortfalls and ensure that prices remain reasonable".

Brent rose to Dollars 80 a barrel - the highest level since 2014 - on concerns that the United States sanctions on Iran will further strain supply conditions, even though the European Union is unlikely to follow the United States in re-imposing the sanctions, suggests the research team at Rabobank.

The statements said Falih briefed Pradhan on his consultations with major producing countries both in and outside of OPEC, including Russian Federation.

Earlier this week, the International Energy Agency (IEA) revised downward its forecast for global oil demand growth in 2018 due to the rising oil prices, citing most emerging economies are no longer subsidizing oil as they did in the past.

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OPEC and its ally Russian Federation have cut their output since January 2017 to help reduce excessive global stockpiles. "Also for the U.S. itself, even though it is close to the tipping point between being a net oil importer or an exporter, oil prices at current levels are likely to be a bigger drag on consumption than they are a boon to business investment".

"Al-Falih assured Pradhan that supporting global economic growth is one of the Kingdom's key goals".

So while $80 might be Saudi Arabia's purported magic number, its spell might prove short-lived.

The oil price has risen by $50 since hitting a 13-year low of $27 a barrel in January 2016 and has gained 50 percent in the last 12 months alone, reflecting both concern over geopolitics and confidence in a more favourable balance between supply and demand.

Meanwhile, the rise in the US dollar since the start of the year may curb the purchasing power of major importing nations to buy crude, especially since many, such as India and Indonesia, no longer offer drivers such as generous fuel subsidies. Geopolitical concerns stemming from unrest in the Middle East to trade tensions between the United States and China, the two largest economies in the world, helped push Brent toward $80 per barrel, its highest level in almost four years if it holds.

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