Saudi Arabia signaled the outlook for crude is sunny and sought to secure sales in the world’s fastest growing oil market with a stake in a planned $44 billion Indian refinery.
Opec’s top producer sees “strong fundamentals” and “reasonable” balance in the short term, according to Energy Minister Khalid Al-Falih. Stockpiles in developed nations are now close to normal levels, he said on Wednesday, signaling that output curbs Opec and its allies have made to shrink a global glut are working.
He also said the kingdom’s state-run producer Saudi Aramco will take a 50 per cent stake in a proposed 1.2 million barrel-a-day refining and petrochemical complex on India’s west coast. The plant will be built with refiners in the South Asian nation, Al-Falih said at a joint press conference with Indian Oil Minister Dharmendra Pradhan in New Delhi as part of the 16th International Energy Forum.
Crude is recovering from the worst price crash in a generation in the wake of the Opec cuts and is now trading near $70 a barrel. Al-Falih on Wednesday said the Middle East kingdom doesn’t have a target price, and that producers remain committed to maintaining stability. They won’t let another glut destroy energy investments, he said.
There’s still more work needed to reduce an oversupply, Opec Secretary General Mohammad Barkindo said in New Delhi on Wednesday.
Brent crude, the benchmark for more than half the world’s oil, traded at $70.83 a barrel early in London trading. It was at more than $115 a barrel in June 2014. US West Texas Intermediate traded at $65.35 a barrel in New York on Wednesday.
While Opec's output curbs continue and are helping prop up prices, Saudi Arabia is looking to secure consumers of its crude as competition for sales intensifies with everyone from the US to Russia. The kingdom has been edged out as the top supplier to India, which imports about 80 per cent of its crude requirements.
As part of the refinery deal signed in India on Wednesday, Saudi Arabia will supply about 50 per cent of the plant’s crude requirements and look to sell more, Al-Falih said. That’s an extension of its strategy to lock up market share by investing in refineries in Asia, the region that’s driving global oil demand growth.
Over the last few years, Aramco has committed billions to projects in Malaysia and Indonesia, as well as a new refining and petrochemical plant in China.
Aramco president and chief executive Amin Nasser said he hopes the Indian project will be built by 2025. The company has the option to bring in another international investor to the project at Ratnagiri in India. While it’s taking half of the plant, Saudi investment in the facility may not be $22bn, Al Falih said, adding that Aramco’s participation will bring down the cost of debt for financing.