There is an oil agreement. But India does not need to worry | HT Editorial – Editorials
Russia, Saudi Arabia, and other major oil producers have agreed to cut oil production. Combined with other measures, the amount of oil sold on world markets will drop by almost 15 million barrels per day. All the price drama has led to oil prices rising roughly 2% per barrel, but they’re still half the $ 60 to $ 70 differential they enjoyed just a few months ago. The main consequence of this agreement is the end of the price war between Russia and Saudi Arabia. The huge drop in oil demand that followed the pandemic outbreak has rendered the price war meaningless. Even with the repair in Moscow and Riyadh, the resulting production cuts will account for only half of the drop in global demand. India, along with other major oil importers, will continue to be general beneficiaries of historically low oil prices.
Even if the pandemic stops, the future of oil prices remains bleak. There will be a mismatch between supply and demand. Oil producers will immediately open their spigots. The shale industry in the United States will come back to life. Furthermore, the rivalry between Saudi Arabia and Russia will continue in one form or another to some extent: India will benefit as a consequence. Saudi Arabia has offset the rise in the price of oil by offering Asian buyers a discount of more than $ 4 per barrel while increasing its demand price for Europe and North America. This reflects a determination to maintain and increase market share in Asia at the expense of other producers such as Russia and the United States. Meanwhile, India may continue to expect low oil prices, as well as a useful period of price stability in the coming months.