Saudi Arabian and Indian officials met at the G20 meeting in Brisbane on Sunday to discuss, among other matters, investment by the kingdom in strategic oil storage in India.
The talks come as Saudi policymakers weigh moves to help deal with a slide in oil prices that has resulted in world oil benchmarks falling by more than 30 per cent since midsummer highs, and which shows no sign of abating any time soon.
Indeed, the International Energy Agency said on Friday that oil prices were likely to weaken further in coming months because of seasonally weak demand. Even when a pickup in the world economy helps to soak up the excess supply, which is forecast for next year, the world oil markets look to be heading into a period of structural oversupply, the IEA said.
“It is increasingly clear that we have begun a new chapter in the history of the oil markets,” the IEA, the Paris-based rich countries’ energy think tank, concluded in its latest world oil market report.
Meanwhile, Saudi Arabia’s deputy premier, Crown Prince Salman bin Abdulaziz Al Saud, met the Indian prime minister Narendra Modi on the sidelines of the G20 meeting to discuss energy and other matters, according to Saudi Press Agency.
This follows a meeting two weeks ago when India’s petroleum minister, Dharmendra Pradhan, met his Saudi counterpart, Ali Al Naimi, and invited Saudi investment in strategic oil storage capacity in India, which imports 70 per cent of its crude and relies on the kingdom for about a fifth of those imports.
Saudi Aramco owns or leases oil storage facilities around the world to help manage the supply of its oil to the market, including Rotterdam (3.9 million barrels), Sidi Kerir (the Sumed pipeline terminal on Egypt’s Mediterranean coast) and Japan (6.3m barrels). At the end of last year, the Saudis extended their strategic storage deal with Japan, which was initiated in 2007, for another three-year period and increased its capacity.
Storage has proved to be an important way to relieve at least some pressure on world markets, with governments and commercial interests putting oil in storage when there are temporary declines in price.
The Chinese, for example, were building their strategic petroleum reserve this year as prices declined, according to the IEA. But as oil supply has consistently outstripped demand for months now, the world’s storage levels have gone above their average for this time of year and seem to be headed higher, especially as the Chinese strategic storage space seems to be full.
amcauley@thenational.ae
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