India’s crude oil production misses target even as oil import bill surges

India’s crude oil production declined by about 2.6% year-on-year to 24,890 thousand metric tonnes (TMT) in the first 10 months of the current fiscal year. Crude production stood at 25,557 TMT in the year-ago period. However, the consumption of petroleum products jumped 4% to 165,719 TMT in April 2021-January 2022, indicating a surge in oil imports.

In January, Indian crude oil production stood at 2,511.66 TMT, or 6.04% lower than the target, and 2.40% lower than January 2021, according to the petroleum ministry.

“Cumulative crude oil production during April-January, 2021-22 was 24,890.07 TMT, which is 4.63% and 2.61% lower than the target for the period and production during corresponding period of last year, respectively,” it said.

India, which imports about 84% of its crude oil requirements, is staring at a rise in its oil import bill due to the recent rally in international oil prices, nearing the $100 a barrel mark on Tuesday. Benchmark Brent index soared to $99.5 a barrel, the highest since September 2014 in intraday trade following the tensions at Ukraine’s borders, before closing the day at $96.84 a barrel.

Analysts said crude oil prices may remain firm primarily due to two factors—geopolitical developments and a supply squeeze by producers, and the current fall, could be due to profit-booking. “Crude oil may remain volatile as market players continue to react to development relating to Russia-Ukraine standoff. The swift retreat in previous session shows that market players are keen on booking profits as western nations respond cautiously to Russia’s action. However, the general bias may remain positive until there are concrete efforts to dissuade tensions in the region,” said Kotak Securities Commodity Insight.

“Tight global supply conditions and escalating geopolitical tensions could support oil prices in international markets,” said Rahul Kalantri, vice president commodities, Mehta Equities Ltd.

Kalantri also cited developments such as the sanctions announced by the US and Britain against Russian banks, the European Union’s move to blacklist more politicians, and Germany putting the brakes on the $11-billion Nord Stream 2 gas pipeline project.

The government is also concerned over the spike in oil prices as it would upset India’s fiscal calculations and will drive up the import bill, two officials working in different economic ministries said, seeking anonymity. The average price of Brent crude has risen from $54.84 per barrel in January 2021 to $87.22 a barrel in January 2022, they added.

“Due to surging international oil prices, India’s import bill may be quite high compared to pre-covid period,” one of the officials said. India’s crude import bill in 2020-21 was at $62.2 billion due to a slump in economic activities following the outbreak of the pandemic in March 2020. However, in FY20, the import bill was at $101.4 billion.

According to data, India’s crude import bill in the first 10 months of the current financial year surged by over 99% at $94.3 billion. It was $47.2 billion in the April 2021-January 2022 period.