On 7 Dec 2023, the global crude oil prices fell to a 5 month low after concerns of low demand in the market. This news comes when Saudi Arabia has already committed to cut oil productions by 1 million barrels per day on 30 November 2023, followed by a 500k barrels per day cut by Russia. Saudis have also cut the price of oil for their Asian customers in a bid to drive demand.
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Low Demand is the Main Factor Driving Oil Prices Down
The global demand for oil has been falling on the back of weakening economies. Several European nations are on the brink of a technical recession. In Q3 of 2023, Euro Zone witnessed a negative growth of -0.1%.
There has been a reduction in the business activity, industrial output which were caused due to rising interest rates and attempts to reduce inflation.
In August 2023, Indian crude oil imports too slid to a 10-month low.
Sources of Indian Crude Oil Imports
Indian reliance on the middle east decreased on the wake of Russia-Ukraine war when global sanctions forced Russian oil and natural gas out of the European markets. This forced Russia to offer crude oil to countries with as deep as 30% discount on the global price.
This is when Indian crude oil imports stareted to increase from Russia.
Is it Good for India?
Oil-based fuels like petrol, diesel, aviation fuel, etc., are the primary energy sources for almost all kinds of road-based transportation in India. A low oil price would mean lesser transportation costs which would further help in reducing the price of transported goods.
Since more than 80% of India’s demand for oil is met via imports, a decline in prices would mean cheaper imports and greater revenue for the states and Union governments.