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Saudi Arabia has reduced premiums on its monthly price of benchmark term crude oil, a pricing bellwether for other West Asian suppliers, for a second consecutive month (for February deliveries), shrinking them to the lowest level since the pandemic of 2020, a pricing document released on Tuesday shows.
An emerging trend in lower premiums for Saudi Arabian oil and, by extension, cheaper oil from other suppliers like Iraq and the United Arab Emirates, translates into huge annual savings for Indian refiners, analysts said.
This comes amid the International Energy Agency forecasting a supply this year of 4 million barrels per day, equivalent to 70 per cent of India’s oil demand.
While the American bombings of Venezuela over the weekend to abduct President Nicolas Maduro were perhaps not considered while notifying Saudi prices for February, resuming Venezuela’s export will have a bearing on the pricing of West Asian suppliers, senior sources in refining companies said.
The last shipment from Venezuela to Reliance Industries’ Jamnagar refinery, of 2 million barrels, was in May last year, the Kpler data showed.
India’s import of Venezuelan oil reached an all-time high of 583,000 barrels a day in November 2014, before Venezuela came under sanctions.
“Venezuelan crude oil is heavy to extra-heavy and can be processed on a sustained basis by only a handful of Indian refineries, constraining system-wide intake,” said Sumit Ritolia, analyst, Kpler, a market-intelligence agency.
State-owned Saudi Aramco will charge a premium of 30 cents per barrel on the Arab Light grade as against the Dubai/Oman crude oil benchmark for February deliveries, the lowest increase since a 50 cent a barrel discount in December 2020, and on a par with the 30 cents in January 2021, according to a document by Saudi Aramco and the historical data accessed by Business Standard.
In return, Indian refiners increased pressure on Saudi Arabia last year by diversifying supply sources to such an extent that the kingdom, once India’s pre-eminent oil supplier, fell from its high position — with the combined Russian and American oil supplies accounting for an unprecedented 46 per cent of Indian import in November, industry officials said, and calculations based on the ship-tracking data show.
Saudi Arabia was India’s third-biggest supplier in 2025 — after Russia and Iraq — at 638,000 barrels a day or 13 per cent of India’s crude oil import, the Kpler ship-tracking data showed.
But its influence is wider because it is the main reference price for other crude oil producers in West Asia.
Shrinking premiums
Saudi Aramco “listens to us when they make a monthly call to take buyers’ reactions on rates’’, two senior traders from state-run refiners said.
Also, a change in Riyadh’s approach has come after China, Saudi Arabia’s biggest customer, has sharply cut the use of fuels by replacing West Asian grades with cleaner energy and discounted sanctioned oils from Iran, Venezuela, and Russia.
“While Indian refiners can substitute barrels from West Asia and the Americas, such alternatives often carry higher delivered costs and tighter economics. As a result, Venezuelan crude oil (heavy and dirty) is expected to re-enter the market at a discount, reinforcing its attractiveness for compatible refineries,” Ritolia said, referring to the Jamnagar plant, which accounts for over a quarter of India’s refining capacity.
Aramco offered a discount of $2.20 a barrel off Dubai/Oman for January for the Arab Heavy grade, nearly on a par with a discount of $2.25 offered for February 2023.
Saudi Arabia’s official selling prices, declared in the first week of every month, serve as a reference for Saudi Aramco to sell crude oil to customers around the world.
The discounts expanded by 30 cents a barrel from January and compared to an annual high premium of $2.10 charged in March, according to the pricing document.
Heavier crudes are of inferior quality and contain much more sulphur than lighter grades.
All of India’s term contracts, assuring guaranteed supplies, come from West Asia, the data from Kpler shows.
