Page 5 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

India's manufacturing and services sectors continued to expand during June 2026, although the pace of
growth moderated slightly amid softer demand conditions and rising input costs. Infrastructure-linked
industries such as steel, cement, and electricity maintained healthy growth despite weakness in coal,
crude oil, natural gas, and refinery production. India's external sector remained resilient, supported by
comfortable foreign exchange reserves exceeding US$700 billion, robust growth in merchandise and
services exports, and continued diversification of export markets and products. Strong performance in
engineering goods, electronics, chemicals, and services reinforced India's growing competitiveness in
higher value-added exports.

The World Bank's US$1.5 billion support for India's reform agenda is expected to strengthen private
investment, employment generation, and productivity, while continued policy emphasis on digital
infrastructure, manufacturing, logistics, and skill development is enhancing the country's long-term
growth potential. India also emerged as one of Asia's fastest-growing green economies, driven by rapid
expansion in renewable energy, sustainable manufacturing, and clean technology investment. At the
same time, robust growth in foreign direct investment reflects sustained investor confidence in India's
macroeconomic fundamentals, expanding industrial base, and ongoing structural reforms.

As far as oil and gas industry is concerned, an interim agreement between the United States and Iran
aimed at ending the conflict in the Middle East could facilitate the reopening of the Strait of Hormuz and
the removal of the U.S. blockade on Iranian oil exports. This marks the most significant breakthrough in
negotiations since the onset of the conflict and has prompted a sharp decline in oil prices, which have
fallen to their lowest levels since early March. Oil prices had already retreated from recent highs as market
concerns eased, supported by a surge in Gulf exports at the beginning of June, accelerated strategic stock
releases by the International Energy Agency (IEA), and weaker global demand. ICE Brent crude futures
were trading at approximately US$81 per barrel, representing a decline of US$37 per barrel from the peak
recorded in early April, although prices remained around US$20 per barrel higher than at the beginning
of the year.

Provided the agreement remains in force, oil production and exports from the Gulf are expected to
recover gradually, particularly as Iranian crude exports are likely to resume in full following the lifting of
the U.S. blockade. Shipments through the Strait of Hormuz had already increased significantly in early
June, aided by ship-to-ship transfers in the Gulf of Oman, with total crude flows rising from a low of 9.6
million barrels per day (mb/d) in May to approximately 12 million barrels per day. Nevertheless, a full
recovery is unlikely to be immediate. Maritime mines will need to be cleared from the principal shipping
lanes, and regional supply chains will require time to return to normal operating conditions.

Hedge funds and other money managers cut their bullish positions in May in both Brent and WTI futures
contracts, betting on easing geopolitical tensions in the Middle East and improving supply conditions.
Speculators sold the equivalent of about 122 mb of oil in May, cutting their combined options and futures
net long positions by 25% in ICE Brent, NYMEX WTI and ICE WTI contracts. Money managers also cut their
net long positions in WTI in May. NYMEX and ICE WTI net long positions dropped by 17,335 lots, or 16.0%,
between the weeks of 28 April and 26 May, to 91,163 contracts, according to the US Commodity Futures

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