New Delhi: Saudi Arabia is committed to meeting India's rising oil demand and is the "shock absorber" for supply disruptions in the oil market, Energy Minister Khalid al-Falih said on Monday.
India, the world's third-biggest oil importer, is grappling with a combination of rising oil prices and falling local currency. Retail prices for gasoline and diesel fuel in India are at record highs and the government has cut its excise tax on fuel to ease some of the pain for consumers.
While there are many factors that could influence global oil prices, Saudi Arabia and other major producers will continue to act to cushion the market from oil price shocks, Falih said at the IHS CERA conference.
"We could have another (round of) unanticipated disruptions that we have seen in Nigeria, Libya, Venezuela. And we have seen sanctions on Iran. These supply disruptions need a shock absorber and the shock absorber to a large extent has been Saudi Arabia," he said.
"We have invested tens of billions of dollars to build spare capacity of 2-3 million barrels per day over years," he added.
Saudi Arabia has the capacity to produce 12 million bpd and is currently producing 10.7 million bpd, Falih said, adding that production will rise further next month.
Falih said oil prices would "easily be at the three digit range had it not been for the extra effort the kingdom has done over many years by investing in capacity and then unleashing that capacity, delivering barrels over last few months, reversing inventory draw down."
Brent crude prices were trading 80 cents a barrels higher at $81.23 by 1157 GMT.
Prices hit a four-year high of $86.74 a barrel earlier this month as the market grapples with the expected loss of Iranian exports due to US sanctions.
Falih said he told India's Prime Minister Narendra Modi and Petroleum Minister Dharmendra Pradhan that Saudi Arabia is committed to meeting its growing oil demand.
State oil company Saudi Aramco plans to supply Indian buyers with an additional 4 million barrels of crude oil in November, several sources familiar with the matter said last week.
Falih also said Saudi Arabia wants to invest in Indian downstream projects and strategic oil storage.
"Saudi Aramco's desire is to invest in consumer-facing segments such as retail fuels and petrochemicals, building an integrated downstream business in India as well as our commitment to invest in strategic storage," Falih said.
India plans to build two strategic storage facilities to hold 6.5 million tonnes of oil costing around 110 billion Rupees ($1.6 billion) through a joint partnership between an Indian state firm and private company.
Falih also said Saudi Basic Industries Corp (SABIC) is keen to invest in India`s chemicals sector.