OPEC+ countries have decided to increase crude oil production from October, but India will not benefit from this. Even with increased production or a fall in prices, India will not find relief due to a weak rupee and high import dependence. The country imported 232.5 million tonnes of crude oil in 2023-24.
Oil production: The world's major oil-producing nations, OPEC+, have decided to increase crude oil production by 137,000 barrels per day from October. However, this will not bring significant benefits to India as a decrease in global demand and a weak rupee will mitigate its impact. India is one of the world's largest oil importers and imported 232.5 million tonnes of crude oil in 2023-24, increasing the country's import dependence to 87.7%. Increased production and price fluctuations can affect India's economy.
OPEC+ Decision and Production Rate
Countries in OPEC+, including Saudi Arabia, Russia, and other allies, have agreed to increase oil production from October. These eight countries will increase production by 137,000 barrels per day. This increase is quite small compared to previous months. For example, in September and August, this increase was approximately 555,000 barrels per day, while in July and June, an increase of 411,000 barrels per day was recorded.
The stated objective of this decision by OPEC+ is to support the oil market and balance the decrease in global demand. Saudi Arabia is trying to increase its market share with this move. This production increase is a new part of the ongoing rise since April, but it is considered surprising amidst the possibility of oil surplus in winter.
Why India Will Not Benefit
Although increasing production generally can lead to a decrease in oil prices, India is unlikely to get much relief this time. The biggest reason behind this is the Indian Rupee, which has weakened against the US Dollar. The Rupee has crossed 88. In this situation, importers will not get any significant relief even if oil prices fall.
If oil prices remain stable or increase despite increased production, it will still be disadvantageous for India as the country has to spend foreign exchange for most of its oil. This means, whether oil becomes cheaper or more expensive, the Indian economy will not receive the actual benefit due to the weakness of the rupee.
Global Demand and Market Volatility
The primary reason for OPEC+'s decision to increase production is to balance the decrease in global demand. If demand improves, oil prices could rise. Conversely, prices might also decrease due to increased production. In both these scenarios, India will not get any significant benefit.
Experts say that geopolitical tensions in the global market and the strengthening of the dollar in America will continue to put pressure on oil prices. India may see an increase in oil import expenditure and an impact on refining costs.
India is among the world's largest oil importing countries. The country's majority oil needs are dependent on Gulf countries and Russia. According to data, India imported approximately 232.5 million tonnes of crude oil in the year 2023-24.
During this period, India's dependence on oil imports increased by 87.7% to about $1.5 billion. The total import bill was $132.4 billion. Due to this import dependence, changes in international oil prices directly affect India's energy budget and economic balance.
India's Challenge Despite Increased Production
The decision by OPEC+ countries to increase production will increase oil availability in the international market, but India will not find relief due to price fluctuations and the weakness of the rupee. It will remain challenging for the Ministry of Petroleum and Natural Gas and oil companies to manage import costs.
Experts say that India will have to deal with market volatility through its oil reserves and dealers. Furthermore, the impact of domestic energy policy and import strategy will also affect oil prices and domestic petrol-diesel rates in the coming months.
