Page 5 - Policy Economic Report - Jan 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Foreign exchange reserves stood at USD 701.4 billion as of 16 January 2026, providing an import cover of
around 11 months and covering over 94% of external debt, thereby strengthening India’s capacity to
withstand external shocks.

Industrial activity gathered further momentum in December 2025, with broad-based improvement
reflected across both the Index of Industrial Production (IIP) and the Index of Eight Core Industries (ICI).
The combined Index of Eight Core Industries (ICI) measures both the individual and aggregate
performance of production across eight key sectors viz. coal, crude oil, natural gas, refinery products,
fertilizers, steel, cement, and electricity. It serves as a leading indicator of industrial performance and
accounts for 40.27% of the total weight of the IIP.

The IIP rose by 7.8% in December 2025, marking its highest level in over two years, following robust
growth of 7.2% (RE) in November 2025. Sector-wise, Manufacturing remained the primary growth driver,
expanding by 8.1%, while Mining and Electricity recorded growth of 6.8% and 6.3%, respectively.

As far as oil and gas industry is concerned, the new year got off to a turbulent start as geopolitical tensions
rose around Iran and Venezuela, bringing new uncertainties regarding their future oil exports. Brent crude
oil prices jumped by $6/bbl to around $66/bbl in the early weeks of January before easing to $64/bbl. Oil
exports from both Iran and Venezuela were already under pressure. Iranian loadings dropped by 350 kb/d
from October’s recent high to 1.6 mb/d over November and December, with volumes piling up at sea.
Venezuelan crude exports slumped from 880 kb/d in December to around 300 kb/d in early January,
impacted by the US blockade of sanctioned oil tankers travelling to and from the country.

Positioning from hedge funds and other money managers was volatile over December. The decline in net
long positions was more pronounced in the first half of December, as speculators sold the equivalent of
138 mb across the Brent and WTI contracts. However, in the second half of the month, speculators raised
their net long positions slightly.

Crude spot prices averaged lower in December, as selling activity in oil futures markets weighed on market
sentiment. However, these declines were limited as physical market fundamentals remained firm,
particularly in the Atlantic Basin, supported by renewed demand from European and US refiners. An uptick
in buying interest from Asian refiners further supported prices. Global refinery intakes rose further in
December to around 83.8 mb/d, indicating robust demand. Stock data were also supportive, as data from
the US Energy Information Administration (EIA) showed a draw of 4.6 mb in US crude oil stocks between
the weeks of 28 November and 26 December. In addition, supply outages in the Caspian Sea region
provided further support to spot crude markets.

Natural Gas spot prices at the US Henry Hub benchmark averaged $4.26 per million British thermal units
(MMBtu) in December 2025. Henry Hub's natural gas prices continued their strong performance,
increasing for a fourth consecutive month in December. Prices rose by ~12%, m-o-m, on the back of a
colder-than-average early winter, which boosted heating demand. According to data from the US Energy
Information Administration (EIA), average weekly natural gas storage decreased by 10.5%, m-o-m, in
December. Moreover, LNG export capacity utilization remained at elevated levels in December, and this
contributed to the price rally in the period. Prices were up by ~41%, y-o-y.

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