Saudi ‘seeking to benefit’ from India-Iran crude payment row

Bloomberg/Mumbai/Dubai

Saudi Oil Minister Ali al-Naimi pledged on June 8 to supply whatever customers needed after Organisation of Petroleum Exporting Countries failed to reach a consensus on production levels at the group’s meeting in Vienna on the same day

Saudi Arabia is seeking to benefit from a payment dispute between Iran and India by selling additional cargoes of crude oil to refiners in the South Asian nation, two people with direct knowledge of the talks said.Saudi Arabian Oil Co, the state producer based in Dhahran, has told refiners in India it can replace some of the Iranian crude, the people said, asking not to be identified because the talks are private. A spokesman for Saudi Aramco who asked not to be identified said the company doesn’t comment on speculation.International sanctions against Iran over its nuclear programme have prevented some refiners in India from finding banks willing to transfer payments for oil. India voluntarily ended a system that channeled funds through a bank in Germany, a government official said April 5. National Iranian Oil Co said on July 3 it warned some Indian companies about payment delays. India owed $2bn to Iran for its unpaid crude bills, NIOC said on May 31.“Riyadh has offered supplies to key Asian customers, stressing that it is a more reliable supplier than Iran,” said David Kirsch, an analyst with PFC Energy in Overland Park, Kansas. “It reflects the long-term commercial strategy to ensure captive demand in the world’s key growing market.”Aramco last month secured sales to three of nine refiners that it approached in Asia and Europe following a pledge by the world’s biggest crude exporter to meet global demand as crude traded over $100 a barrel, people with knowledge of the sales said last month. The company found buyers in India, China and Japan, three people said on June 20, asking not to be identified because the sales are confidential. Six refiners in Asia contacted by Bloomberg said they turned down offers of more oil.Saudi Oil Minister Ali al-Naimi pledged June 8 to supply whatever customers needed after the Organisation of Petroleum Exporting Countries failed to reach a consensus on production levels at the group’s meeting in Vienna on the same day.A Saudi plan to lift output, which was backed by Gulf neighbours Kuwait and the UAE, was blocked by Iran, along with Libya, Angola, Ecuador, Algeria and Venezuela. In the days that followed the Opec meeting, Aramco told customers they could have additional barrels on top of the supply they already receive under long-term contracts, according to Asian and European refiners.Iran should be wary of Saudi attempts to sell more oil to Asian refineries so as not to lose market share, the country’s Opec Governor Mohamed Ali Khatibi was cited as saying on July 7 by Tehran newspaper Shargh. Saudi Arabia “has reached out” to potential buyers of crude, particularly in Asia, he said.An Iranian official this month backed away from threats to cut off crude sales to India, saying exports were continuing. Mohsen Qamsari, NIOC’s head of international affairs, said the producer had “no intention of halting supplies to the Indian market,” the Oil Ministry news website, Shana, said July 3.The impasse at Opec and Aramco’s efforts to address market demand come as Saudi Arabia and Iran, the Middle East’s two biggest oil producers, have clashed over anti-government uprisings in Middle Eastern nations including Bahrain.Saudi Arabia supplied troops as part of a regional force sent to Bahrain to restore order in the country. Iranian Foreign Ministry spokesman Ramin Mehmanparast on March 15 referred to the deployment of Gulf Cooperation Council troops in Bahrain as “meddling.”“The Saudis will be reluctant to allow politics to once again influence their decisions on oil production and marketing issues,” PFC’s Kirsch said. “With tensions rising because of the Arab Spring and accusations of Iranian interference in Bahrain, Riyadh may be looking to nonetheless put a shot across the bow.”Middle Eastern producers have boosted production to replace Libyan supplies choked off by fighting between rebel forces and troops loyal to Libya’s leader Muammar Gaddafi. Most Opec members, including Iran and Saudi Arabia, have been producing above their Opec production quotas this year as crude prices rose to highs not seen since 2008.