India Oil Market Faces Pressure Amid Global Demand Concerns and Stronger Dollar

Key Highlights

1. Price Trends: Brent crude declined by 0.56%, and WTI dropped similarly, pressured by demand concerns and a strong U.S. dollar. 
2. Demand & Supply Outlook: Sinopec forecasts China's crude imports will peak by 2025, while global supply is projected to rise as U.S. production expands.
3. Economic Influences: The Federal Reserve’s cautious rate cut approach and the dollar's strength are raising oil costs for non-dollar buyers and curbing demand expectations.
4. Market News: India’s HPCL plans a $551M investment to boost lube oil capacity, with mechanical completion in 36 months.
5. Expert Insights: Analysts foresee potential tightening of global supplies if the U.S. imposes stricter sanctions on Iran, despite an overall surplus projection for 2025.

Oil Price Trends: Weekly Decline Driven by Demand Worries

• Oil prices fell on Friday on worries about demand growth in 2025, especially in top crude importer China, putting global oil benchmarks on track to end the week down nearly 3%.
• Brent crude futures fell by 41 cents, or 0.56%, to $72.47 a barrel by 0420 GMT. U.S. West Texas Intermediate crude futures fell 39 cents, or 0.56%, to $68.99 per barrel. MCX Crude oil prices opened at 5905 with a fall of 0.47%.

Supply Projections: U.S. and Non-OPEC+ Growth in Focus

• Chinese state-owned refiner Sinopec said in its annual energy outlook, released on Thursday, that China's crude imports could peak as soon as 2025 and the country's oil consumption would peak by 2027 as diesel and gasoline demand weaken.
• Meanwhile, the dollar's climb to a two-year high also weighed on oil prices, after the Federal Reserve flagged it would be cautious about cutting interest rates in 2025.
• A stronger dollar makes oil more expensive for holders of other currencies, while a slower pace of rate cuts could dampen economic growth and trim oil demand.
• J.P. Morgan sees the oil market moving from balance in 2024 to a surplus of 1.2 million barrels per day (bpd) in 2025, as the bank forecasts non-OPEC+ growth increasing by 1.8 million bpd in 2025 and OPEC output remaining at current levels.

Industry News: HPCL’s $551M Expansion for Lube Oil Base Stock

• India’s HPCL to Invest $551M to Increase Lube Oil Base Stock Capacity, Mechanical completion at Mumbai is slated to be over in 36 months.
• Both Brent and WTI contracts were positioned for a weekly decline of over 2 percent, with most of their losses occurring in the last two sessions. 
• The stronger dollar continued to apply downward pressure, as the greenback surged on the expectation that U.S. interest rates would remain higher than previously anticipated in 2025.
• Concerns about sluggish demand and oversupply also clouded the oil market outlook. 
• Worries about weak demand, particularly from top oil importer China, weighed heavily on prices. 
• China’s oil imports have been on a steady decline in 2024, reflecting the country’s economic challenges amid ongoing disinflation. 
• Although China has announced plans for aggressive fiscal spending to stimulate growth, traders are waiting for more concrete details. 
• As the world’s largest oil importer, China’s situation has been a significant concern for oil markets in recent years.

Expert Opinion: Balancing Surplus Projections with Geopolitical Risks

• It is anticipated that increased production in the U.S. will keep traders cautious about a potential oversupply in the coming year. Trump has promised to boost domestic oil production.
• However, he may also take a tougher stance on Iran, possibly imposing stricter sanctions on the country’s oil exports. This scenario could tighten global supplies, particularly as the Organization of the Petroleum Exporting Countries and its allies have recently indicated intentions to extend their current production cuts.