Page 5 - Policy Economic Report - March 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

? Secondary and Tertiary sectors have boosted the performance of the economy by registering
above 9.0% growth rate in FY 2025-26.

? Trade, Repair, Hotels, Transport, Communication & Services related to Broadcasting, Storage
sector has attained a growth rate of 10.1% at Constant Prices in FY 2025-26.

? Year-on-year inflation rate based on All India Consumer Price Index (CPI) with base year 2024
for the month of February, 2026 over February, 2025 is 3.21%(Provisional). Corresponding
inflation rates for rural and urban are 3.37% and 3.02%, respectively.

HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 56.9 in
February from January's 55.4. A PMI above 50 signals expansion. India's factory activity expanded at its
fastest pace in four months in February as strong domestic demand drove new orders and production.
However, growth in new export orders continued its slowing trend that began in mid-2025, restricting
employment creation in the manufacturing sector. New export orders grew at the slowest pace in 17
months, suggesting U.S. tariff uncertainty remains despite a recent trade deal with India.

India’s foreign exchange reserves declined sharply in the week ended March 6, dropping to $716.81
billion from $728.49 billion the previous week, according to data released by the Reserve Bank of India
(RBI). Most of the decline came from foreign currency assets, which fell by $9.8 billion during the week.
The value of gold reserves also decreased by $1.6 billion. Foreign currency assets, which form the largest
component of India’s reserves, are expressed in US dollar terms and reflect the impact of fluctuations in
the value of other currencies held by the central bank.

As far as oil and gas industry is concerned, the global oil market is contending with the ramifications of
the war in the Middle East. Beyond the direct damage to energy infrastructure in the region, the crisis
has led to a near halt in tanker movements through the Strait of Hormuz. With nearly 20 mb/d of crude
and product exports currently disrupted and limited alternative options to bypass the world’s most
critical oil transit chokepoint, producers and consumers globally are feeling the strain. Benchmark crude
oil prices have surged by $20/bbl to $92/bbl since the outbreak of hostilities on 28 February, with even
bigger increases across product markets. With few ships currently able or willing to load cargoes at port,
and domestic storage tanks filling up, producers in the region are reducing or shutting in production.
While the situation on the ground is fast evolving and at times opaque, we estimate that crude
production is currently being curtailed by at least 8 mb/d, with a further 2 mb/d of condensates and
NGLs shut in. Major supply reductions are seen in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia.

Disruptions are not limited to upstream production and exports, with several refineries and gas
processing facilities shut down due to attacks or for safety concerns. The closure of the Strait is also
forcing export-oriented refineries to cut runs or shut completely as product storage tanks top up, with
more than 4 mb/d of refining capacity at risk. Gulf producers exported roughly 3.3 mb/d of refined
products, and 1.5 mb/d of LPG in 2025. While additional throughputs in other regions are possible,
feedstock availability will be a limiting factor. This has prompted some countries to implement product
exports restrictions. Diesel and jet fuel markets look to be particularly vulnerable to an extended loss of
Middle East production and exports, given limited flexibility elsewhere to increase output.

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