Extension of production cuts by Opec+ won't impact India: Govt officials

Earliest reversal of production cuts pushed back to March 2025 on Thursday

India is not expected to be impacted by the continuing cut in oil production by Opec-plus countries, given the lower global industrial demand outlook and continuing discounts on Russian crude, officials at the petroleum and natural gas ministry said.

 

On Thursday, Opec-plus nations agreed to extend two sets of voluntary production cuts, including the ongoing cuts of 2.2 million barrels per day (bpd), to the end of March 2025. “Then the 2.2 million bpd adjustments will be gradually phased out on a monthly basis until the end of September 2026 to support market stability. This monthly increase can be paused or reversed subject to market conditions," the bloc said. In place since November 2023, these cuts are currently being implemented by eight countries, including Saudi Arabia and Russia.

   

The oil bloc also extended ongoing cuts of 1.65 million bpd until the end of December 2026. These were initially announced in April 2023.

 

But officials played down the development. "The latest announcement is about continuation of existing production cuts. It is not expected to change the crude oil supplies to India," an official said.

 

They pointed to November data from the International Energy Agency (IEA), which shows global supply will exceed demand by more than 1 million bpd in 2025, even if the Opec-plus cuts were to remain in place.

 

The official also indicated that Indian refiners remain assured of uninterrupted crude supplies at discounted rates. As of November, the share of Russian crude in India's imports remained at 38 per cent, slightly down from 39 per cent in October, show estimates made by London-based commodity data analytics provider Vortexa, which tracks ship movements to estimate imports. Russia's share in India's oil imports is expected to hold at these levels for the foreseeable future, analysts believe.

 

The average discount of Russian Urals grade of crude oil to dated Brent has held stable at $12.1 per barrel in the three months leading up to October, according to Platts, part of S&P Global Commodity Insights. Despite ongoing tensions in the West Asia and other uncertainties, the firm sees an easing of Platts Dated Brent to an average $70 per barrel in 2025, down from $81 per barrel in 2024. Apart from subdued global oil demand growth, expected production increases from non-Opec-plus sources are cited as reason.

 

Under pressure

 

An intergovernmental organisation of 13 major oil-producing nations, such as Saudi Arabia, Iran, Iraq, and Venezuela, among others, Opec has been called a “cartel” by economists. Member countries accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s “proven” oil reserves as of 2018. Including Russia, 10 other nations make up the enlarged Opec+ group.

 

Opec has implemented total supply cuts of 5.86 million bpd, or 5.7 per cent of global oil demand, so far. It had postponed the easing of voluntary production cuts even before the latest announcement. These supply curbs were originally scheduled to be gradually phased out starting October this year, but have been maintained amid a slump in oil prices. Brent, the dominant international benchmark, has dropped nearly 19 per cent since reaching $91 a barrel in April. On Thursday, it was steady at $72.51 a barrel as of the time of writing this report.