OPEC+ Announcement and India

The recent announcement by the OPEC+ to cut oil output by 2mb/d is a big one.

The announcement reeks of political leanings as the OPEC+ combined unanimously decided to cut output in a meeting that lasted less than 30 min. Clearly President Joe Biden's visit to Saudi Arabia 3 months back did not yield any dividend. Prince Abdulaziz said the real cuts would be 1.0-1.1 mb/d since OPEC+ failed to meet production targets. OPEC+ production fell about 3.6 mb/d short of its output target in August. Analysts are divided on the actual cuts as Jefferies said they estimated the real cuts at 0.9 mb/d while Goldman Sachs put it at 0.4-0.6 mb/d.

**Now the question that comes is can the US balance the market through SPR release? SPR capacity is at 714 million barrels (mb) which will fall to 342 mb after the 180 mb release announced on Mar 31, 22 is complete. Can the administration release more? IEA says SPR must retain the equivalent of 90 days’ worth of the previous year’s net imports. U.S. net imports have averaged 3.024 MMb/d so far in 2022 so US must hold at least 272 mb which leaves a surplus of 70 mb while it already has a congressional commitment of sales of 33.5 mb in 2023. This only leaves 36.5 mb available in surplus.

Looking at the above, it may very well happen that post US mid term elections, SPR releases are done for the short term !!

Brent crude prices are up 12.66% at 94.35 since hitting the low of $ 83.98 on 27th Sep 2022.

Rising crude oil prices do not bode well for India as can be seen from today's price action in USDINR which touched a high of 82.20 in the post market hours trading.

India's provisional trade deficit for the month of Sep 22 came in at a still elevated $ 26.73 bn ( exports at 32.62 bn and imports at 59.35 bn). The trade deficit seems to have peaked in the month of July 22 at $ 31 bn. Crude oil prices fell in September on recessionary concerns and offered some respite from the elevated deficit concerns. Recent moves in oil have added a fresh layer of uncertainty to an already uncertain economic landscape. Funding a BoP deficit of usd 74 bn will be a challenge (est. current account deficit of $ 140 bn and capital account surplus of $ 66 bn)

**source RBN Energy

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