India urges oil producers to ease output cuts as crude prices soar

New Delhi: Petroleum minister Dharmendra Pradhan on Wednesday urged crude oil-producing nations to do a rethink on ongoing production cuts, at a time petrol and diesel are retailing at record high prices in India. The rising oil prices during the last few weeks are now threatening a fragile global economic recovery, Pradhan said.

The Indian basket of crude, which comprises Oman, Dubai and Brent crude, was at $62.64 a barrel on 16 February. Global crude prices have been rallying after the Organization of the Petroleum Exporting Countries (Opec)-plus grouping decided to continue with supply curbs. This has impacted India, the world’s third-largest oil importer, as Opec makes up for about 40% of global output and 83% of the country’s oil imports.

“The price-sensitive Indian consumers are getting adversely affected by rising petroleum product prices. It also affects demand growth, which could potentially impact the delicate aspirational economic growth trajectory not just in India but in other developing countries as well,” Pradhan said at the 11th IEA-IEF-OPEC Symposium, according to a petroleum and natural gas ministry statement.

This comes in the backdrop of the benchmark Brent crude trading at $64.42 per barrel on Wednesday. The West Texas Intermediate was at $60.23 a barrel at press time. Every dollar increase in the price of crude raises India’s import bill by ₹10,700 crore on an annualized basis. India spent $101.4 billion on crude imports in 2019-20 and $111.9 billion in 2018-19.

“The rising oil prices during the last few weeks are hurting the fragile global economic recovery leading to significant demand contraction. The key producing countries have not only revised the production cuts over and above the previously announced levels, but also made additional voluntary cuts,” Pradhan said, according to the statement.

India has earlier expressed its displeasure to Opec for ‘backtracking’ on its commitments. India has been making a case for lower oil prices, given that any increase in global prices can affect its import bill, stoke inflation and widen its trade deficit.

“In 2019-20, India imported over 85% of oil and 53% of gas to meet the demand. Can a diverse and talented nation like ours be so energy import dependent?” said Prime Minister Narendra Modi on Wednesday while laying the foundation stone of 9 million metric tonnes per annum Cauvery Basin refinery.