OPEC+ supply cuts may keep crude oil prices elevated: RIL

OPEC+ supply cuts may keep crude oil prices elevated: RIL

Voluntary oil production cut by the Organisation of Petroleum Exporting Countries and its allies, or OPEC+, might keep crude oil prices elevated and impact demand, RIL said in a media call on July 21.

Saudi Arabia has implemented an additional production cut of one million barrels per day (bpd) from July 2023. In May, the OPEC+ had cut oil production by 1.6 million bpd for 2023.

In the May cuts, Saudi Arabia had reduced supply by 500,000 bpd, while Iraq had cut over 200,000 bpd until the end of the year. Russia, which is part of OPEC+, had announced an extension of its production cut of 50,000 bpd till the end of 2023.

V Srikanth, Chief Finance Officer, RIL, said that going ahead, high inflation, subdued global demand, and increased supply from China might affect the company’s downstream exports to the US and Europe.

"Overall, from a risk factor point of view, voluntary oil production cuts by OPEC+ countries may keep crude prices elevated and impact demand. Other factors to impact demand could be higher inflation, higher supply from China, etc. These might impact our exports to the US and Europe," he said in a media call on July 21.

In India, the company expects downstream chemical demand to be robust on the back of economic activity.

The company said it expects the volatility in natural gas prices to continue this fiscal considering the high storage levels and higher output of nuclear power by Japan and France. "We hope to see a recovery in demand in China in the second half. With policy support, that should hold us in good stead on the price front," said Sanjay Roy, Senior Executive Vice President – E&P, RIL.

Reliance Industries on July 21 reported a consolidated net profit of Rs 18,258 crore for the quarter ended June 2023, down 5.9 percent from a year ago. Muted performance in the oil-to-chemicals (O2C) segment partly offset strong growth in its consumer-facing businesses.

The revenue of the O2C business, RIL’s biggest, stood at Rs 1.33 lakh crore in the first quarter of the financial year 2023-24, a 17.7 percent decrease on-year on account of the sharp reduction in crude prices and lower price realisation of downstream products.

The company said global oil demand in Q1FY24 rose by 2.8 million bpd year-on-year (YoY) to 101.4 million bpd, due to higher demand mainly from China, Middle East, and Asia. Jet fuel/kerosene and gasoline posted strong demand growth YoY, while the demand for diesel remained flat, it added.

“Crude oil benchmarks fell YoY due to macroeconomic headwinds like high-interest rates and lower industrial activity in the US and EU. Continued Russian oil supply despite the EU ban kept the market in surplus in Q1FY24,” the company said in a release on July 21.

Dated Brent averaged $78.4 per barrel in Q1FY24, lower by $35.5 per barrel YoY and $2.9 per barrel quarter-on-quarter (QoQ).

RIL said that demand for high-speed diesel (HSD), motor spirit (MS), and aviation turbine fuel (ATF) in the quarter increased by 8.1 percent, 6.8 percent, and 13.3 percent YoY, respectively. India’s polymer and polyester demand during Q1FY24 improved by 16 percent and 5 percent YoY, respectively, it added.