India's Crude Imports Rise Amid Supply Concerns and Market Volatility

Key Highlights

1. Price Trends: Brent crude traded at $72.64 (+0.44%), and WTI at $69.53 (+0.42%), with Indian MCX January crude futures at ₹5934 (+0.56%).
2. Indian Demand: Crude oil imports increased by 2.57% YoY in November, reaching 19.07 million tonnes.
3. Global Supply Updates: Analysts predict oversupply in 2025, potentially pushing Brent prices to $70.50/barrel, down from 2024's $79.64 average.
4. Procurement Challenges: Indian refiners face difficulty securing Russian Urals crude, with alternatives from the Middle East and Africa cutting profit margins.

Petroleum Prices: Crude Oil Prices See Modest Gains

• Crude oil futures traded higher on Tuesday morning following strong US economic data and increased demand from India.
• March Brent oil futures were at $72.64, up by 0.44 per cent, and February crude oil futures on WTI (West Texas Intermediate) were at $69.53, up by 0.42 per cent.
• January crude oil futures were trading at ₹5934 on Multi Commodity Exchange (MCX) during the initial hour of trading on Tuesday against the previous close of ₹5,901, up by 0.56 per cent, and February futures were trading at ₹5,922 against the previous close of ₹5,890, up by 0.54 per cent.

Oversupply and Lower Brent Prices Anticipated for 2025

• The latest crude oil import data released by the Petroleum Planning and Analysis Cell of the Union Ministry of Petroleum and Natural Gas showed 2.57 per cent increase in crude oil imports by India in November. 
• India imported 19.07 million tonnes of crude oil in November 2024-25 against 18.59 million tonnes during the corresponding period of 2023-24. India is one of the major consumers of crude oil in the global market. 
• January natural gas futures were trading at ₹290.30 on MCX during the initial hour of trading on Tuesday against the previous close of ₹283.40, up by 2.43 per cent.
• Analysts forecast an oversupply for next year, which is expected to push Brent prices to an average of $70.50 per barrel, lower than this year’s $79.64 average, according to a December report.
• Concerns about European supply eased after reports confirmed the Druzhba pipeline, which transports Russian and Kazakh oil to Hungary, Slovakia, the Czech Republic, and Germany, resumed operations following technical issues at a Russian pumping station last Thursday.

Petroleum News: Global Supply Dynamics and Market Outlook

• The recovery comes amid light trading volumes ahead of the Christmas holiday and a cautiously optimistic market outlook for the short term. Analysts at FGE suggest that prices will likely remain range-bound as paper market activity slows during the holiday season, with participants waiting for clarity on 2024 and 2025 oil market balances.
• The FGE report also highlighted that any potential supply disruptions could spark upward price movements due to the short positioning in the paper market. These sentiments reflect growing consensus among analysts that the market may see increased volatility due to limited liquidity.
• Strong U.S. economic indicators continue to provide a supportive backdrop for oil prices. In November, new orders for U.S.-manufactured capital goods surged, driven by rising machinery demand. Meanwhile, new home sales rebounded, underscoring the resilience of the world’s largest oil-consuming economy.
• Analysts anticipate further insights from crude oil inventory data, with the American Petroleum Institute’s report expected on Tuesday and the Energy Information Administration (EIA) report due Friday. Preliminary estimates suggest a drawdown of 2 million barrels in U.S. crude inventories for the week ending December 20, signaling healthy demand in the short term.
• Neil Crosby, assistant vice president of oil analytics at Sparta Commodities, noted shifting dynamics in the market. He pointed out that the EIA’s short-term energy outlook projects a supply draw for 2025, even as OPEC+ barrels gradually return to the market.

Expert Opinion: Petroleum Market Outlook

• Indian state refiners, including IOC, BPCL, and HPCL, are experiencing difficulties in procuring Russian Urals crude for January due to reduced spot market offers. The decline in availability may stem from Russia prioritizing long-term contracts and the independent deal by Reliance Industries with Rosneft. 
• While alternative crude supplies from the Middle East and Africa exist, they are costlier and reduce profit margins. Moscow and New Delhi are encouraging refiners to adopt long-term contracts, but pricing disagreements hinder state refiners' participation.