India's influence rises in crude oil

Almost unnoticed, India is starting to exercise increasing influence on crude oil markets in Asia.

The South Asian nation has doubled imports to almost 4 million barrels per day (bpd) in the past decade, in the process overtaking Japan, Germany and South Korea to become the world's third-biggest importer behind China and the United States.

Its importance to the outlook for crude oil over the next decade becomes even more apparent in the light of slowing demand growth in China, the likelihood of at best steady consumption in much of the developed world and declining demand in Japan.

Two recent events underscored the importance that India is assuming in Asian crude oil markets: the visit by a senior official of Saudi Arabia's state oil giant and talks between Indian refiners and Iraq over filling strategic storage.

The main news from the visit of Ahmed Al-Subaey, Saudi Aramco's executive director for marketing, to New Delhi last week was that the kingdom is ready to boost output in coming months to meet rising global demand.

That was information useful to market players, but what wasn't discussed in public was what the Aramco executive was talking about with the Indian oil officials he met.

It doesn't require much imagination to conclude that the Saudis are interested in expanding their relationship with India, given it is becoming the main driver of crude demand growth in Asia, something Al-Subaey acknowledged.

India imported 3.964 million bpd in the first four months of the year, a decline of 0.6 percent over the same period in 2014.

However, import growth was affected by refinery maintenance in April and it's expected to accelerate over the rest of the year, with full-year imports expected to exceed 4 million bpd.

Saudi Arabia supplied about 760,000 bpd to India in the first four months of the year, a gain of 4.6 percent over the same period last year.

But the Saudis will be well aware that their oil will face competition from Middle East rivals in coming months, especially if Iran is successful in getting Western sanctions relaxed and Iraq continues to pump more crude.

Clyde Russell is a Reuters columnist.