Page 5 - Policy Economic Report - October 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

were lower by 90 bps. The fall was driven by a steep, prolonged 9-month food price decline of 10.5%,
the longest in the CPI series.

The HSBC Flash India Composite Output Index, which measures the combined performance of India’s
manufacturing and services sectors, fell to 59.9 in October from 61.0 in September, marking its lowest
level since May this year, according to data released by S&P Global. This seasonally adjusted index,
which tracks month-on-month changes in the combined output of the two sectors, indicated a slower
rate of expansion. However, overall growth remained strong, with the index staying well above the
neutral mark.

On the external front, India’s foreign exchange reserves rose by $4.496 billion, reaching $702.28 billion
for the week ending October 17, majorly driven by an increase in the value of gold reserves. Foreign
currency assets (FCA), the largest part of the reserves, fell by $1.692 billion to $570.411 billion. These
assets are influenced by changes in the value of currencies such as the euro, pound, and yen. The value
of gold reserves rose sharply by $6.181 billion to $108.546 billion. Special Drawing Rights (SDRs) also
saw a slight increase of $38 million, reaching $18.722 billion. India’s reserve position with the
International Monetary Fund (IMF) fell by $30 million to $4.602 billion in the reporting week, according
to RBI data.

As far as oil and gas industry is concerned, the oil market has been in surplus since the start of the year,
but stock builds have so far been concentrated in crude in China and gas liquids in the United States. By
September, however, a surge in Middle East production, coinciding with seasonally lower regional crude
demand, boosted exports to two and a half-year high. This, combined with robust flows from the
Americas, swelled oil on water in September by a massive 102 mb, equivalent to 3.4 mb/d, the largest
increase since the Covid-19 pandemic. Brent crude oil futures rose by an average $0.30/bbl to
$67.60/bbl m-o-m in September. But by early October, the wave of tankers at sea and the
announcement of new trade measures pushed prices down by $4/bbl to $64/bbl.

Global oil supply in September was up by a massive 5.6 mb/d compared with a year ago. OPEC+
accounted for 3.1 mb/d of the increase, as the Group of 8 unwound 2 mb/d of production cuts, and as
Libya, Venezuela and Nigeria all posted strong gains. Based on their latest agreement, OPEC+ is now on
track to lift output by 1.4 mb/d on average this year and by a further 1.2 mb/d in 2026. Non-OPEC+
producers are set to add 1.6 mb/d and 1.2 mb/d, respectively, over the same timeframe, with the
United States, Brazil, Canada, Guyana and Argentina leading growth. Risks to the forecast remain, with
sanctions imposed on Russia and Iran compounding geopolitical concerns. Persistent attacks on Russian
energy infrastructure have cut Russian crude processing by an estimated 500 kb/d, resulting in domestic
fuel shortages and lower product exports. The drop in Russian middle distillate exports reverberated
globally as regular buyers scrambled to secure alternative supplies, bidding up diesel and jet fuel cracks
in the process. Light sweet crude refining margins hit two-year highs in Europe and 18-month highs on
the US Gulf Coast and in Singapore in September.

Crude spot prices were mixed in September. Light sweet benchmarks edged lower m-o-m, while
medium sour grades posted gains. North Sea Dated and WTI came under pressure from softer refinery
demand amid the autumn maintenance season in the US and Europe, and higher WTI availability from

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