UAE Exit From Opec May Offer Price, Logistics Advantage To India
India sees opportunity to secure long-term oil trade agreement with UAE as Abu Dhabi ramps up production outside Opec quotas
Quick Look
- India could benefit from the UAE's exit from Opec, officials said, as the country seeks to secure energy supplies following West Asia conflict-related squeezes.
- With India importing 90% of its 5.8 million barrels daily consumption, the UAE's increased production outside Opec quotas offers a chance for lower prices and reduced freight costs from a geographically closer supplier.
- India may negotiate a long-term oil trade agreement with the UAE, leveraging their strategic partnership.
AI-generated summary
The UAE's exit from Opec may prove significantly beneficial for India, which is looking to secure its energy requirements in the long run following the recent squeeze on supplies amid the military conflict in West Asia, officials in the know said.
While Abu Dhabi has taken the decision to ramp up production without being constrained by Opec quotas, officials said it may translate into an opportunity for India to source oil at lower prices from a friendly and geographically closer supplier.
India imports nearly 90% of its estimated daily crude oil consumption of 5.8 million barrels. A senior government official said this may give India an opportunity to enter into a long-term oil trade agreement with the UAE without being bound by Opec's production restrictions on member nations.
"It will be beneficial given the logistical advantages and the higher quality of crude exported from the region," said an official. "Given the strategic partnership that India has with the UAE, there could also be negotiations on crude prices."
When asked for a reaction on the impact of the UAE exiting Opec on India, Sujata Sharma, joint secretary in the petroleum ministry, said it was too early to comment.
The UAE is the third-largest oil producer among Opec members after Saudi Arabia and Iraq and contributes nearly 13% of the group's total production. While the UAE's oil production capacity is estimated at 4.2-4.5 million barrels per day, it currently produces about 3-3.2 mbd and plans to increase output to 5 mbd by 2027.
"Since the UAE is closer to India than the US, Russia and African nations, higher purchases will mean lower freight charges," the official said, adding it would also reduce India's import bill.
