Brent crude oil prices fell to $71.20 per barrel on Wednesday, touching a three-month low, as concerns about slowing Chinese demand and doubts about OPEC+ compliance overshadowed the cartel's recently announced output cuts. Weak Chinese manufacturing PMI data and softer US gasoline demand figures weighed on market sentiment, pushing both Brent and WTI crude lower.
Several OPEC+ members including Iraq, UAE and Kazakhstan have reportedly been producing above their allocated quotas, effectively undermining the effectiveness of the group's production restraint strategy. Analysts estimate the actual OPEC+ over-production at around 400,000 barrels per day, limiting the price support from announced cuts. Rising non-OPEC supply from the US, where shale output has reached a new record of 13.5 million bpd, adds to the supply glut.
For India, lower crude prices are significantly beneficial. Every $10 per barrel decline in crude prices reduces India's annual oil import bill by approximately Rs 1 lakh crore and improves the current account deficit by about 0.4% of GDP. Lower crude also reduces fuel inflation, improving consumer purchasing power and giving the RBI more room to ease monetary policy. Oil marketing companies' marketing margins also improve, potentially leading to retail fuel price cuts ahead of state elections.
