Saudi Arabia, the world’s largest crude oil exporter, has announced voluntary output cuts in crude oil in response to a tighter market induced by global central banks’ interest rate hikes and inflationary pressures. These cuts, initially set for this month, now have been extended to include August.
Additionally, OPEC+ has agreed to further reduce production targets by 1.4 million barrels per day from 2024. As a result, Saudi Arabia’s oil production will decline from 10 million to 9 million barrels per day starting in July, with other OPEC producers extending supply cuts until the end of 2024.
Industry leaders believe that the decision by Saudi Arabia to reduce output raises concerns about its potential impact on India’s economy, inflation, and cost of living.
It can impact the FMCG sector as well with the cost of fuel going up leading to high logistics costs, said Manish Aggarwal, Director, Bikano, Bikanervala Foods.
“Also, inflation has always been a factor of worry as it impacts spending habits and prioritizes essential items over discretionary purchases, leading to a potential slowdown in demand for certain FMCG products,” he added.
According to Aggarwal, if fuel prices rise due to higher oil prices, it can indirectly impact consumers leaving them with less disposable income to allocate towards FMCG purchases.
“As a result, FMCG companies may need to carefully navigate these market dynamics and consumer behavior to maintain competitiveness and sustain consumer demand,” the director said.
Furthermore, Gautam Bajaj, CEO of, Savory underlines that India’s economy heavily relies on oil and any fluctuations in crude prices directly impact the country
“From plastic containers to many of the finished products that we buy from the market are somewhere directly or indirectly dependant on crude import. If the Indian government buys crude at a higher price due to the short supply from Saudi Arabia then consumers will have to pay a higher price for the finished product which will result in inflation,” he said.
Bajaj stated that the Indian government needs to negotiate harder with Saudi Arabia to cover crude at the prevailing price for the coming 6 months and in due course have to figure out an alternative source of crude oil imports.
However, Amarnath Halember, CEO, of NextG Apex India highlights that India, with its diverse resource landscape and partnerships with countries like Russia, Bulgaria, and Ukraine, has multiple options for importing oil.
” As the festive season approaches, the major players in this arena hold the power to steer the numbers on volumes, thus mitigating any significant impact on oil prices. In this era of abundance and strategic collaborations, India’s oil market remains resilient, ensuring stability for its energy needs.” Halember said.
Currently, OPEC nations account for around 30 percent of the world’s crude oil production.