India's Crude Oil Market Rising Import Dependence Geopolitical Shifts and Supply Diversification Efforts

Key Takeaways:

• Steady Oil Prices: After a sharp decline last week, oil prices showed improvement on Monday due to easing fears of Middle East supply disruptions.
• Rising Import Bill: India’s crude oil import bill rose by 12% in the first half of FY25, despite a drop in crude prices in September.
• Reduced Domestic Production: Domestic crude oil production declined in India, increasing country’s reliance on imports to 88.2%.
• Government Initiatives: The Indian government introduced a bill to boost domestic production and diversify suppliers, especially looking at Brazil despite challenges.

Petroleum Prices: Oil Prices Show Signs of Stability

• Oil prices steadied in early trading on Monday, following a more than 7% drop last week on worries about demand in China, the world’s top oil importer, and an easing of concerns about potential supply disruptions in the Middle East.
• Brent crude futures rose 8 cents, or 0.11%, to $73.14 a barrel by 0120 GMT. U.S. West Texas Intermediate crude futures gained 10 cents, or 0.14% to $69.32 a barrel.
• October crude oil futures were trading at ₹5850 on Multi Commodity Exchange (MCX) during the initial hour of Monday, down by 0.09 per cent compared to the previous close of ₹5,855, and November futures were trading at ₹5,836 compared to the previous close of ₹5,839, down by 0.05 percent.

Petroleum Demand-Supply: Growing Dependence on Crude Oil Imports

• India’s crude oil import expenditure rose by 12% during the first half of FY25, reaching $71.3 billion, compared to $63.7 billion in the same period of FY24, according to data from the Petroleum Planning and Analysis Cell. Crude oil imports totaled 120.5 million tonnes between April and September, reflecting a 4% increase from 115.9 million tonnes during the same period last year. However, in September, despite a 6.3% rise in import volumes to 18.6 million tonnes the crude oil import bill dropped by 3% compared to September 2023.
• India’s reliance on imported crude oil climbed to 88.2% in the first half of FY25, up from 87.6% in FY24, primarily driven by increased demand and stagnant domestic production. From April to September, domestic crude production declined to 14.4 million tonnes, down from 14.7 million tonnes the previous year. Similarly, September's production dipped to 2.3 million tonnes, compared to 2.4 million tonnes in 2023, indicating a persistent struggle to boost domestic output despite government efforts.

Petroleum News: Latest Oil Market Updates

• The government introduced a bill in Parliament to amend the Oilfields (Regulation and Development) Act, 1948, aiming to stimulate the oil sector. The amendment broadens the definition of mineral oils to include naturally occurring hydrocarbons such as coal bed methane, shale gas, and oil shale. These changes are intended to attract more industry players and boost production.
• The government is also preparing to sign contracts under the 10th round of the Open Acreage Licensing Programme (OALP), aligned with the new provisions in the amendment bill, expected to pass during Parliament's winter session.
• India is actively seeking alternative suppliers amid escalating geopolitical tensions in the Middle East. It has intensified efforts to increase crude imports from Brazil, but logistical challenges and the availability of discounted Russian crude could hinder progress. During a recent visit to Brazil, Oil Minister Hardeep Singh Puri discussed expanding imports and exploring offshore deepwater exploration projects.
• Although Brazilian crude imports to India have been sporadic in 2024, peaking at 41,600 barrels per day (bpd) in April and 143,000 bpd in December 2023, India recently approved a $1.6 billion investment in Brazilian oil fields to secure equity oil and reduce dependence on foreign suppliers.

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Expert Opinion on Indian Petroleum Market

• India's rising dependency on crude oil imports, coupled with stagnant domestic production, underscores its reliance on foreign suppliers. The government is pursuing new supplier agreements, regulatory amendments to boost hydrocarbon production, and diversification efforts, including increased imports from Brazil.
• However, geopolitical tensions and the availability of discounted Russian crude may challenge these plans. Initiatives like the OALP licensing round and investments in overseas oil fields aim to reduce import risks and enhance energy security.