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Venezuela Crisis No Threat to India's Oil Bill, Says Bank Report

A Bank of Baroda report states that the U.S.-Venezuela geopolitical tension poses no immediate risk to India's oil import bill due to a global crude supply glut. Venezuela contributes only about 1% of global production, making its market impact marginal. The country provides India with some of the lowest unit-value crude oil imports, helping contain costs. While increased U.S. production in Venezuela could lower global prices, geopolitical uncertainty may limit the necessary large-scale investments.

Key Points: Venezuela Crisis Poses No Risk to India's Oil Import Bill

  • Global crude supplies in glut mode
  • Venezuela's share of global production is only 1%
  • US potentially tapping Venezuelan reserves softens prices
  • Venezuela offers India one of the lowest crude import unit values
  • Geopolitical uncertainty may deter investment needed to boost Venezuelan output
2 min read

Venezuela crisis poses no immediate risk to India's oil bill: Report

Bank of Baroda report says global crude glut and Venezuela's small production share shield India's oil import costs from immediate geopolitical risks.

"Given the current global supply scenario... the report does not foresee any upside risk to India's oil import bill in the near term. - Bank of Baroda report"

New Delhi, Jan 6

The ongoing geopolitical tension between the United States and Venezuela does not pose any immediate risk to India, and the country's oil import bill is unlikely to rise under present conditions, a report said on Tuesday.

The report from Bank of Baroda said the import bill will remain unchanged as "global crude supplies are likely in a glut mode", and Venezuela's share of global production is marginal at about 1 per cent.

The bank maintained that Venezuela's proven reserves are large, at roughly 19.4 per cent of the world total. Market conjecture that the reserves could be tapped by the US to increase supplies has already softened crude prices in today's trading.

"Given the current global supply scenario and surplus conditions, the report does not foresee any upside risk to India's oil import bill in the near term," it said.

Bilateral trade between India and Venezuela stood at $1.9 billion, with exports of $217 million and imports of $1.6 billion, and petroleum, oil and lubricants account for the bulk of imports.

"For imports, Petroleum, Oil, and Lubricants (POL) occupy the major share, especially crude petroleum. The unit value of India's import of POL is also lower for Venezuela compared to major countries from which India imports oil," said Dipanwita Mazumdar, Economist, Bank of Baroda.

India's exports to Venezuela have declined at a 5-year CAGR of (-) 8.8 per cent, compared to 6.9 per cent growth in India's overall global exports, reflecting reduced trade momentum

The US leads Venezuela's crude exports, followed by China and India, reinforcing the importance of oil diplomacy in ongoing negotiations

Venezuela offers one of the lowest unit values for crude oil imports among India's major suppliers, helping contain import costs.

Analysts said, in another recent report, that any increase in the production of oil from Venezuela by US companies has the potential of lowering crude prices in the international market, benefiting all countries, including India. However, they noted geopolitical uncertainty in the region could deter large investments to pour into the Latin American country.

- IANS

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Reader Comments

P
Priya S
While the immediate risk is low, we should not become complacent. Our trade with Venezuela has already been declining. We need to diversify our oil sources more aggressively. Good analysis by BoB though.
R
Rohit P
Venezuela gives us cheap oil! That's the key point. In a country where every rupee matters for development and subsidies, getting crude at a lower unit value is a big win for our economy. Hope the diplomacy keeps it flowing.
S
Sarah B
Interesting read. The global glut is the real story here. It shows how interconnected everything is—a crisis on one side of the world can lead to lower prices for consumers here. Complex but fascinating.
K
Karthik V
The report is reassuring, but let's be honest, "geopolitical uncertainty" is a fancy term for "things can go wrong anytime." We need a solid Plan B. Our strategic reserves should be topped up while prices are soft.
N
Nisha Z
Good news for now. But the long-term decline in our exports to Venezuela is worrying. It's not just about buying oil; we should also be selling them more goods. That's a trade relationship we need to fix.

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