Mukesh Ambani’s Reliance Industries is reportedly in talks to sell a 25% stake in its refinery and petrochem business to Saudi Aramco for an estimated $10-15 billion. Details of the deal aren’t known yet, but it could be a gateway to India for the Saudi state-owned company that boasts of the world’s biggest crude oil reserves; its partnership with Indian state-run refiners and retailers for a refinery in Ratnagiri, Maharashtra, has not made headway. Fresh from a $10-billion bond issue, the Saudi company has announced a forward integration plan, and is on the lookout for investment opportunities. The current question, however, is what Reliance sees in Aramco. The short answer: crude oil supplies at preferential rates from an equity partner.

That would be a win-win if prices suit both sides. Perhaps Reliance is keen on this because the global price of its chief input, crude oil, seems to be on an uptrend again. Oil hit a five-month high of over $72 per barrel this week, defying expectations that a rise in US shale oil production would cap the price. Crude supplies have been squeezed by the Organization of the Petroleum Exporting Countries (OPEC), which has been acting in league with Russia to limit output and exert monopoly control—the very influence that America’s shale-oil revolution was expected to curtail. Meanwhile, political turbulence in north Africa and US sanctions on Venezuela and Iran have piled up pressure. It’s not that US shale output hasn’t increased, it’s just that the rise hasn’t been enough to stall oil’s climb, and this suggests that OPEC may yet to able to regain its former pricing power.

After the 2014 crash in the price of oil, many market analysts had written OPEC obituaries, arguing that it would be unable to push prices higher than a range of $50-60, the point at which US shale supplies are estimated to turn profitable. This assumption is being revised now. That Reliance is ready to strike a deal with Saudi Aramco is a sign that doomsday calls on OPEC may have been premature. From the look of it, the oil cartel is back in the game. Private strategists and public planners should take note.

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