Sources in the Middle East speculate that Saudi
Arabia may bring the crude oil price down for Asia once more, exactly as it did
during the first wave of the pandemic.
Saudis may have taken into account the significant
drop in demand from the region in the first quarter of this year: the crude oil
imports by India, for instance, have fallen by 11.8%, compared with the same
during the same period last year; in March, this year, the relationship between
India and Saudi Arabia soured over the production cuts while India turning to
alternate sources for its imports.
Being true to its threats, India turned to the US
and the latter became the second largest supplier of the crude oil to the
former. With this development, Saudi share of the Indian market fell by 42%
while the US share went up 48% in February this year.
Indian authorities, meanwhile, were making plans to
diversify its sources of crude oil from the Middle East; they were focusing on
Iran, Venezuela, the US and even some African countries.
With the deadly outbreak of the Coronavirus in India
during the last two weeks, the relations between the former allies, Saudi
Arabia and India, appeared to have improved; the Kingdom made some contribution
to getting oxygen supply in India on track in its hour of need.
Against this backdrop, the Saudis may have taken
into account the toll taken on the India economy by the resurgence of the
Coronavirus.
In addition, the imminent entry of Iran into the
crude oil markets as a normal trader must have played a role too in the
thinking behind the calculations.
In Japan too, the demand of crude oil must have
suffered in proportion to an increase in infections; Japan is the world’s
fourth biggest importer.
In the rest of Asia too, there are clusters of infections
mushrooming in the last few weeks; the situation, however, is not as bad as
what is happening in India.
In this context, the regional bodies may have asked
Saudi Arabia to take stocks of the situation; although it has agreed in
principle to ease the production cuts from May to June in line with what is agreed
upon in March at the OPEC+ meeting, the Saudis show their willingness to go the
extra mile to help region at a crucial time.
It could be interpreted as a charitable gesture too,
especially as this is the Ramadan season in the Islamic world; millions of
workers from the Asian region make an immense contribution to Saudi economy at
present in very difficult circumstances.
If confirmed officially, the Saudis are in a better
position to go ahead with the price move for Asia: the Saudi Aramco, world’s
biggest oil company, announced today that its profit has gone up by 30%; it’s a
remarkable achievement given the lingering volatility in the oil markets.
