SDG 7: Affordable and Clean Energy | SDG 13: Climate Action
Institutions: Ministry of Finance | Ministry of Petroleum & Natural Gas
The ECB’s recent article “Shifts in OPEC+ behaviour and downside risks to oil prices” analyses the recent downward trend in global oil prices, attributing it to weakening global demand and a fundamental shift in the strategic behaviour of the OPEC+ coalition. Traditionally, OPEC (with Saudi Arabia as the “swing producer”) played a stabilising role, but since early 2025, the group has repeatedly increased oil supply, more than fully unwinding earlier cuts. This move signals a strategic deviation, possibly intended to regain market share from non-OPEC producers like US shale oil, mirroring the cartel’s actions in 2014.
This aggressive supply expansion exerts strong downward pressure on prices. The ECB’s model analysis projects that if OPEC continues this strategic shift and reduces its market power, global oil prices could fall by around 10%, potentially stabilizing near USD 60 per barrel by 2027. This creates significant risks and benefits for consuming economies by introducing potential disinflationary shocks to the global economy.
This research is profoundly positive for India, a major net importer of crude oil, as it quantifies a significant downside risk to prices. Every $10 drop in global crude prices is estimated to improve India’s Current Account Deficit (CAD) by up to 0.4% of GDP and reduce inflationary pressures by up to 0.3%, providing headroom for the RBI’s monetary policy and bolstering the rupee’s stability.
What is OPEC+ ? → The alliance known as OPEC+ is a powerful group of oil-exporting nations formed in 2016 that strategically coordinates global crude oil production to influence market prices. It consists of the 12 member countries of the original OPEC (Organization of the Petroleum Exporting Countries, founded in 1960) plus 10 major non-OPEC oil-producing allies, most notably Russia. This expanded coalition controls approximately 40% of the world’s crude production and 60% of global petroleum trade, granting it significant leverage to influence international energy prices. The core objective of OPEC+ is to stabilize the market and ensure a profitable and steady income for its members by agreeing on production targets, which, if collectively lowered (production cuts), typically drives prices up, and if raised (production hikes), can drive prices down due to increased supply.
What is a “Swing Producer” (in the oil market)?→ A “swing producer”—a role historically held by Saudi Arabia—is an oil-producing entity that adjusts its output up or down to help stabilize the global supply/demand balance and, consequently, global oil prices.
Relevant Question for Policy Stakeholders: What policy instruments can India deploy to balance short-term gains from cheaper crude with long-term commitments to energy transition and carbon-intensity reduction?
Follow the full update here: Shifts in OPEC+ behaviour and downside risks to oil prices