India expects Trump’s return to White House to improve oil availability, ease international oil prices

“More and more oil is coming to the market. One expects, as a result of that, that the market situation will calm. At some stage, the producers who have cut back (oil production) will also decide…if there is more coming on to the market, they just might use the oil that they have in order to earn revenue for development. I see that as a natural byproduct of where we are going,” the minister said at a Confederation of Indian Industry (CII) event in the Capital.

For India, which is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement of the commodity, higher oil availability and the consequent downward pressure on international oil prices would be generally beneficial. Heavy reliance on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation.

While it may be too early to say how Trump’s second term as president will turn out to be for global oil markets, industry watchers expect the Trump administration’s economic and energy policies to put limited downward pressure on oil prices. If strictly implemented, his plans to impose high tariffs on imports–particularly on those from China–could negatively impact global oil demand as China is the world’s top oil importer.

Moreover, Trump’s push to significantly increase US oil production and even exports, for which he employed the slogan “Drill, baby, drill”, could add to the global oil supply and even push major oil producers to compete for market share by increasing their own oil production and exports. Subdued demand from China and rising production from non-OPEC+ suppliers have weighed on international oil prices over the past few months. From around $85 per barrel in mid-April, the price of benchmark Brent crude has fallen to around $72 per barrel.

In a recent note, S&P Global Commodity Insights (SPGCI) said that growing US crude production has posed a significant challenge for OPEC+ in recent years, exerting downward pressure on prices, threatening the bloc’s market share and prompting massive output cuts to support oil prices. Analysts say increased US production, as well as output increases in other non-OPEC+ countries, such as Brazil, Guyana and Canada, have nearly nullified the impact of OPEC+ production cuts in 2024.

SPGCI expects Asian buyers—including India—to witness significantly more opportunities to import “attractively priced crude from the US” as its competition with the OPEC suppliers intensifies. The US is India’s fifth-largest source market for crude oil behind Russia, Iraq, Saudi Arabia, and the United Arab Emirates (UAE).

Apart from his economic and energy policies, Trump’s diplomatic moves could also affect the international oil market. During his election campaign, the US president-elect had vowed to end the ongoing conflict in the Middle East and the Russia-Ukraine war. Although Trump has not outlined what he has in mind to wind down these conflicts, experts expect his administration to make concerted efforts to that end in order to score a diplomatic victory early in his presidency. Cooling off of these conflicts is likely to bring stability to the global oil market.

“What we need is stability and predictability (in oil markets) so that in the period ahead, countries can base their decisions on lines which are predictable. Because fluctuations create uncertainties in the market, and that is not good for economic decision making…Stability in oil prices depends both on the availability and the global geopolitical situation calming,” Puri said Thursday.