Enough oil available in the world, expect to navigate situation comfortably: Puri on OPEC+ output cuts

OPEC+ in November had agreed to the voluntary cuts totalling about 2.2 million barrels per day (bpd) for the January-March quarter. The cuts are part of the group’s efforts to support oil prices by regulating production in the face of rising output from other producers and concerns over oil demand outlook. OPEC+, which is led by Saudi Arabia and Russia, has implemented a series of production cuts since 2022.

India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. Given the country’s extremely high import dependency, India’s economy is sensitive to oil price volatility. Apart from inflationary pressures, high oil prices could have implications for India’s trade balance, foreign exchange reserves, the rupee, and the overall health of the economy. The country is set to overtake China in a few years to become the biggest driver of global oil demand. India has been advocating for pragmatic, responsible, and affordable pricing of crude oil that balances the interests of consumers as well as producers.

Speaking at an industry event on Monday, Puri said that how much oil major producers want to pump and export is their sovereign decision and he would not like to tell them what to do. The minister said that the production cuts notwithstanding, there is no shortage of oil and the international market has been factoring in these elements. Puri added that India has been diversifying its source markets for crude oil and expressed hope that with new producers like Guyana expected to come on stream in the coming years, India will be able to comfortably secure energy supplies.

It is worth noting that the upward movement in oil prices following the Sunday decision of OPEC+ was limited as market participants had been expecting the output cuts to be extended and had largely factored it in over the past few weeks.

While recent geopolitical tensions and the production cuts have supported oil prices to some extent over the past few months, there has not really been a price surge and crude continues to trade well below $100-per-barrel mark. Concerns over demand in some major economies, including China, and growing oil production from non-OPEC+ producers like the United States (US) have evidently kept the market from panicking. The last time crude oil traded over $100 per barrel was in August 2022 when global energy markets were on the edge due to the war in Ukraine.

While Puri has generally refrained from publicly commenting on what major oil producing countries should do in terms of production, he has in the past cautioned that if oil prices are allowed to climb significantly, it could lead to demand destruction and hasten transition to green energy and future fuels, which in turn would be counterproductive for major oil producers.