Page 5 - Policy Economic Report - December 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The Reserve Bank of India (RBI) cut the repo rate by 25bp to 5.25% and announced liquidity measures,
including open market bond purchases and FX swaps. The RBI announced open market purchases of
government securities worth INR 1 trillion this month and USD/INR buy-sell swap auctions totalling USD
5 billion to inject liquidity into the system.

India's private sector business activity showed robust growth in December, although the pace slightly
slowed from November. The HSBC India Composite PMI fell to 58.9 from 59.7, marking the softest output
growth since February. Both manufacturing and services sectors experienced this slowdown, primarily
due to a softer rise in new orders, though demand remained strong.

On the external front, India’s forex reserves were up by $4.36 billion to $693.32 billion for the week ending
December 19, according to data released by the Reserve Bank of India (RBI). Further, India’s total exports
(Merchandise and Services combined) for November 2025 is estimated at US$ 73.99 Billion, registering a
growth of 15.52 percent vis-à-vis November 2024. Total imports (Merchandise and Services combined)
for November 2025 are estimated at US$ 80.63 Billion, registering a negative growth of (-) 0.60 percent
vis-à-vis November 2024.

As far as oil and gas industry is concerned, the apparent disconnect between the current global oil surplus
on the one hand and inventories near decade lows at key pricing hubs on the other. Indeed, despite record
volumes of oil piling up on water, benchmark crude oil prices eased only marginally in November, with
North Sea Dated last trading at around $63/bbl and WTI at $59/bbl, with lower forward disincentivizing
storage. Still, the market mb/d Demand/Supply Balance trends have clearly been affecting prices over
time, with ICE Brent down by nearly $20/bbl since January.

Hedge funds and other money managers maintained a broadly bearish stance toward crude oil prices in
November, reinforcing downward pressure on the futures complex. Between the weeks of 28 October
and 25 November, speculative participants sold the equivalent of around 51 mb, reflecting a continued
retreat from bullish positions. Net long positions in ICE Brent futures and options declined as short
positions rose to near-record levels, amplifying bearish sentiment and heightening market volatility. The
build-up in short exposure came alongside continued liquidation of bullish positions following the
previous month’s selloff.

Crude spot prices averaged lower in November. Selling pressure in futures markets, along with efforts by
refiners and traders to keep oil stocks low to avoid high value-based inventory taxes at the end of the
year, weighed on spot prices. High freight rates for main routes also weighed down on spot prices. These
factors were partially offset by positive developments that limited the decline in prices, including higher
global refinery intake in November and stronger refining margins across all major trading hubs. Signs of
renewed demand in the spot market, as well as concerns about the supply of sour crude due to additional
supply restrictions in Eastern Europe, helped to support prices.

Natural Gas spot prices at the US Henry Hub benchmark averaged $3.79 per million British thermal units
(MMBtu) in November 2025. Henry Hub's natural gas prices rose for a third consecutive month, increasing
by 18.8%, m-o-m, in November. Prices continued to advance, supported by a combination of the shift into
the US heating season and higher LNG demand, particularly from the EU, as it looks to replenish its
inventories. However, reports of higher storage levels limited gains. According to data from the US Energy
Information Administration (EIA), average weekly natural gas storage increased by 4.0%, m-o-m, in
November. Prices were up by ~78%, y-o-y.

November 2025 Page | 4