Spigots to open wider, buyer bargains ahead

Eight oil-producing nations in the Opec+ alliance agreed last week to increase their collective crude output by 548,000 barrels per day, citing improving global economic fundamentals and low stockpiles worldwide. But other factors are also shaping this strategy. Opec+, which includes Russia, has been struggling to enforce output quotas among its members. The group, responsible for half the world's oil supply, is also looking to protect its market share as alternative sources ramp. Meanwhile, the US has been pressuring Saudi Arabia and other Opec members to boost production to rein in domestic inflation. With the Israel-Iran conflict now de-escalating, the market's focus is shifting back to longer-term concerns-namely, a demand slowdown driven by trade fragmentation and the global energy transition.

This is certainly good news for oil-importing economies like India that are growing fast and have an all-sources approach to energy. Global conflict has forced India to source crude further afield from traditional suppliers in the Persian Gulf. The share of Russian oil in the Indian import basket rose after the Ukraine war, and supply from the US and Africa increased during the Israel-Iran hostilities. Opec will be seeking to regain customers like India once geopolitical uncertainty abates. That could require some effort, as buyers may be reluctant to dial back on diversification.

The pace of India's energy transition allows it to secure better terms in a weakening sellers' market. Opec+ control is limited by the supply of US shale oil that enters the market above a certain price and physical limits to allow its oil wells to idle. China's progress towards alternative energy sources makes India a contender to drive oil consumption growth. India can now articulate its needs to oil-producing nations and expect a sympathetic response. Stable sources of supply work in its favour of creating the necessary energy transport infra. Refining capacity creates scope for India to play a bigger role in the maritime oil trade.