The much-awaited meeting of the Organisation of the Petroleum Exporting Countries (OPEC) on Wednesday, November 30, would be a major trigger for global stock and currency markets, including India. An agreement on capping output would lift prices and sentiments for investors, while a deadlock would dampen the mood globally.
The 14-member cartel of major oil producers will be meeting in Vienna, Austria to agree on limiting output to 32.5-33 million barrels per day; in October, it was 33.83 million barrels a day.
"Output from the group's 14 members has climbed for five months running, led by Iraq and Saudi Arabia... production recovered in Nigeria and Libya and flows from Iraq hit an all-time high," the International Energy Agency (IEA) said in its Oil Market Report for November.
On Tuesday, Brent crude oil LCOc1 was down 55 cents a barrel at $47.69 by 9.15 am GMT, while US light crude oil CLc1 dropped 55 cents at $46.53 a barrel, reported Reuters.
The members of the OPEC are Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, Algeria, Qatar, the UAE, Nigeria, Libya, Indonesia, Gabon, Ecuador and Angola.
A decision to implement the September plan (to cut output) at the Wednesday meeting could see the situation moving from surplus to deficit next year while a failure to do so could see prices remaining at current levels or even slide.
"If no deal is reached, our expectation of rising (crude) inventories through 1H2017 would warrant prices averaging $45 per barrel through next summer," Reuters quoted Goldman Sachs as saying.
Crude oil statistics at a glance (as sourced from IEA)
Global demand in 2015 was 1.8 million barrels a day, a five-year high. It's estimated to have dropped to 1.2 million barrels a day this year and likely to remain at that level next year.
Production is expected to increase in 2017 as a result of Brazil, Canada and Kazakhstan, resulting in non-OPEC output rising by 0.5 million barrels a day in comparison to a fall of 0.9 million barrels a day this year.
2017 is likely to be another year of glut, leading to prices remaining depressed.
India and global crude oil dynamics
India, currently the world's fastest-growing economy in the world, is a net importer of crude, sourcing 80 percent of its requirments. A rise in prices would spike its import bill while low prices would enable it to manage its finances well.
India's provisional oil import bill for 2015-2016 was Rs. 4,18,931 crore ($64.4 billion) for importing 202.5 milliom metric tonnes (mmt) of crude, down from Rs. 6,87,416 crore ($112.74 billion) paid to import 189.43 mmt.
On Tuesday, benchmark stock market indices ended with gains. The BSE Sensex closed 44 points higher at 26,394 while the NSE Nifty ended the day at 8,142, up 15 points.
"Market is slowly inching up supported by a strengthening rupee and the reducing prospects for an oil output freeze in tomorrow's OPEC meeting," Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services, said in a note.
Top Sensex gainers were Maruti Suzuki, GAIL (India), Asian Paints and Bharti Airtel.