As Prime Minister Narendra Modi begins deliberations in Jeddah with the top Saudi leadership including Crown Prince Mohammad bin Salman, an announcement by the International Energy Agency (IEA) a week ago, slashing forecasts for global oil demand, may loom large in the discussions.
The IEA warned that oil demand this year may amount to no more than 7,30,000 barrels a day, down by at least 3,00,000 barrels. Half the reduction was concentrated in the US and China, that are engaged in a trade war. Meaning that China, the world’s top oil importer at over 11 million barrels per day in 2024, is no longer buying in such quantities.
Oil prices are down to $60 a barrel, a four-year low. Add to that a surprise decision by OPEC+ (Organisation of Petroleum Exporting Countries +) to step up production from next month.
All this means prices could fall further, straining the finances of oil producers including Saudi Arabia, that in Dec 2024, produced 8.9 million barrels a day. The Saudis are hopeful Narendra Modi can help them out. Modi hinted at this in a statement ahead of his departure for Jeddah.
“our energy demands will continue to grow and Saudi Arabia will remain a close partner in our energy security. As strategic partners we agree that our energy cooperation is not limited to mere buyer-seller relationships. We are exploring joint projects in refineries and petrochemicals.”
Saudi Aramco, the state-owned oil and gas monopoly, is interested in the expansion plans of two Indian oil majors: Bharat Petroleum, which is expanding its Bina refinery to produce a range of import intensive products such as Low-density Polyethylene, Polypropylene and other aromatics.
Then there’s ONGC, India’s top oil producer that is making a major push into the renewable energy sector.
The Saudis know that although they figure among India’s top three oil suppliers (along with Iraq and the UAE), the Russians are not far behind more so given their oil is selling at below the Western price cap of $60 a barrel. By investing in India’s downstream assets, they could improve their position.
Modi and Crown Prince Salman will chair the second meeting of the Strategic Partnership Council set up in 2019. Defence is an area of interest with the two armies and navies holding joint exercises.
“We have been able to meet some of the needs of the armed forces in Saudi Arabia,” he said without elaborating, and urged “Saudi investment into the defence manufacturing sector in India.”
He is expected to raise the issue of problems with fulfilling India’s Haj quota of 1,75,025 pilgrims for this year. The ambitious India Middle East Europe trade corridor is also expected to figure in the discussions.
