An oil super glut is coming—and India may benefit from it
Crude oil prices were already heading lower before the Venezuela crisis. They are expected to drift even lower after the recent US intervention. And India, as a major importer of crude, stands to gain.
The US's action in Venezuela could have a major impact on the global oil market. Venezuela holds some of the world’s largest proven oil reserves, but years of international sanctions have sharply constrained output.
If US sanctions are lifted following the country’s invasion, it could open the tap for Venezuelan oil. While higher supply is generally positive for consumers, it’s not necessarily so for oil companies.
The consensus is that even before the Venezuelan invasion, the global oil market was heading for a glut in 2026. Prices were expected to fall sharply. While it will take time for Venezuelan oil production to come back online, when it does, it will act as a major additional factor in weak oil prices. This is good news for oil-importing countries such as India.
Venezuela’s dropoff
Venezuela has the world’s largest proven oil reserves, of around 303 billion barrels, according to data from the Organization of the Petroleum Exporting Countries (Opec), the world oil cartel. It accounts for almost 20% of global oil reserves.
By comparison, Saudi Arabia, one of the top three countries in oil production, had estimated proven reserves of 267 billion barrels. But production is a different story. In 2024, Venezuela produced an average of 921,000 barrels per day of crude oil, accounting for 1.3% of the global daily average production.
This sharp drop-off from reserves to production is a consequence of global sanctions against the country. As and when these sanctions are lifted following the invasion, it will still take time for oil majors to ramp up production.
Share prices of US oil refiners have already risen sharply. These firms are well-equipped to process the heavy grades of crude produced in Venezuela. Before the US invasion, the bulk of Venezuelan crude was bound for China.
‘Super-glut’ in the making
The potential return of Venezuela’s crude oil comes at a time when the International Energy Agency (IEA), an autonomous inter-government organisation, has forecast a has forecast a sharp surplus of about 3.8 million barrels a day in 2026 from 2.3 million in 2025.
“The combination of surging production and sluggish consumption growth is generating a global oil glut," said the World Bank. “The implied oil surplus (supply minus demand) is…partially due to Opec+ having raised its production targets several times since April."
Indeed, the surplus for 2026 is forecast to be higher than that during 2020, the first covid year. Economists at Trafigura, one of the world’s biggest commodity traders, have warned of a ‘super-glut’ in the world oil market in 2026.
According to the IEA’s latest forecast, while global oil demand is set to rise by 860 kilobarrels per day in 2026 on average, global oil supply is set to grow by 2,400 kilobarrels per day in the same period.
Lower prices
The US EIA (Energy Information Administration) notes that global stocks of crude oil rose in the final two quarters of 2025 by an average of 2.5 million barrels per day—the highest such rise since 2000, excluding covid-hit 2020.
All this means only one thing for prices: a downward trend. From an average of $80.7 per barrel in 2024, the average price of Brent crude fell to $69 in 2025, the lowest annual average since 2020. This is expected to fall further to the low-$60s in 2026, with the US EIA putting it at $52 this year.
What are the factors affecting this forecast? In demand terms, one assumption is weaker-than-expected growth in China. If, the Chinese economy bucks this expectation, global crude markets could tighten.
“Escalating conflict in regions such as the Middle East or Ukraine, along with the market impact of additional sanctions—including recent US measures against Russian oil companies—could also drive prices above current forecasts," says the World Bank.
The India factor
China and India are expected to account for 40% of the global consumption in 2026, up from 25% in 2025. This rise is expected to come mainly from India.
According to the World Bank’s October 2025 commodity outlook (which is based on IEA’s forecasts), global oil consumption is projected to expand only moderately, with China’s oil demand to be restrained by the rapid adoption of electric and hybrid vehicles, while demand in advanced economies is expected to remain broadly unchanged.
Growth in India’s oil demand is expected to be driven by naphtha/diesel and jet fuel.
Even in the longer term, India is expected to remain a major source of demand growth in the oil market. According to a 2024 IEA report on India, “India will become the largest source of global oil demand growth between now and 2030, while growth in developed economies and China initially slows and then subsequently goes into reverse."
Balance in payments
An oil glut in 2026 is good news for India. During April to October 2025, oil imports accounted for $82 billion in foreign exchange. The average price of crude in this period was about 13.4% below that during the same period in 2024, resulting in a 4.3% drop in import bill.
While less relevant now, since inflation is already low, falling crude prices keep the overall price level steady. A central bank estimate found that a 10% rise in global crude prices leads to an increase in headline inflation by 0.2% (this effect is not necessarily the same if crude prices fall).
Structurally, though, India’s oil import bill is set to rise continuously over the longer term. “Despite renewed efforts by the government to attract foreign upstream investment, domestic crude oil production is expected to see continued declines over the medium term," IEA said in a report.
“A dearth of new discoveries in recent years will contribute to Indian oil supply falling (further relative to domestic supply)."
Thus, India’s reliance on imports will continue well into the future and lower crude oil prices are always good news.
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