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Recent global oil production cuts come even as India’s demand for energy has been growing faster than the global average and that of many large economies.
The country’s expected demand of 5.39 million barrels a day in 2023 is a 4.86 per cent increase from its oil demand in 2022, shows data from the Organization of the Petroleum Exporting Countries (Opec). In comparison, world oil demand is expected to rise by 2.32 per cent to 101.9 million barrels a day in 2023 over the previous year. India's demand for oil has also grown more than its consumption in the pre-pandemic period. And ever on this metric it surpasses many large economies. It is up 8 per cent in 2023 compared to 2019 levels (chart 1). Oil demand is lower in 2023 compared to 2019 in the US (-0.1 per cent) and Europe (-5.5 per cent). World demand is expected to be 1.6 per cent higher in 2023 compared to 2019 levels.
The Opec countries and other nations, including Russia (collectively called Opec+) on Sunday announced production cuts of 1.16 million barrels a day. India is highly dependent on imports to cater to its rising crude oil demand.
With the latest production cuts due to start next month and with an extension of the current Russian crude export cuts due in July, this would reportedly mean a reduction of 1.6 million barrels of crude oil a day. The group had previously instituted similar cuts in October 2022 of 2 million barrels a day, or about 2 per cent of the global supply, because of rising interest rates and slowing global growth.
Russia, a member of Opec+, has said that its existing production cuts may continue till the end of 2023. However, despite Russia’s reduction in the production of crude, mainly due to sanctions by western nations and the price cap on its crude oil exports by the G7 countries (United States, Japan, Germany, United Kingdom, France Canada, and Italy), India is relying on cheap Russian imports to fulfil its domestic demand for crude. Since the invasion last year, Russia has unseated India’s biggest oil partners. Russia now accounts for 38.51 per cent of India’s crude imports, shows data from tracker Refinitiv, an LSEG business. It was 2.26 per cent in March 2022 (chart 2).
Russia invaded Ukraine in February 2022. India’s imports from Russia hit multiple record highs in the past six months, and are now 20 times the pre-invasion average, noted Yaw Yan Chong, Director, Oil Research (Asia) at Refinitiv in an emailed response to Business Standard queries.
“For products, diesel is the most impacted as Europe imports large volumes of the product from Russia and has to turn to alternate suppliers, including India,” he said.
The continent which imported about half of the fuel from Russia before the invasion has been diversifying its petroleum product imports. While Europe accounted for just 14.92 per cent of India’s diesel exports in January 2022, its share in the country’s exports rose to over 50 per cent in January and February this year (chart 3).
