Oil above $65, the case for Reliance


Well-Known Member
Back in March, India instructed oil companies to lower their dependence on Saudi Oil, and to look at other sources. This came about because Saudis refused to increase supply to lower global prices.

This move by India was quite a major problem for the Saudis. Because India is the second largest consumer of Oil after China, and now that US is a net exporter, India becomes even more relevant for the Saudis.

Just days after this move by India, both Saudi Aramco and Reliance reiterated that the deal by Aramco to buy 20% of Reliance O2C was still on. And it was quite obvious that price was the only issue.

This deal becomes even more crucial for the Saudis - because it gives them foothold in India, independent of PSUs. However, Mukesh Ambani being Mukesh Ambani, absolutely refused to budge on the price - insisting that Aramco pays $15B! And there wasn’t any reason for Reliance to budge - because their fund raising last year solved their debt issues.

Today, this deal is far more important for Aramco, than it is for Reliance. And now that oil price is flirting above $65, it’s becoming reasonable for Aramco as well to pull the trigger.

The decks for this deal have been cleared, and O2C has been spun off into a separate company. If Oil stays above $65, it’s just a matter of time before Aramco bites the bullet and buys 20% of Reliance O2C, giving huge cash flow to Reliance.

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