Page 7 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

prices. Against this backdrop, the RBI maintained the repo rate at 5.25 per cent and retained a neutral,
data-dependent monetary policy stance.

India's external sector remained resilient, supported by a strong reserve position and robust services
exports. Foreign exchange reserves reached a record US$785.71 billion as of 4 September 2026, providing
a substantial buffer against external shocks, commodity-price volatility and global financial-market
pressures. India's total exports of merchandise and services increased by 25.41 per cent year-on-year in
August to US$82.68 billion, while services exports continued to provide a strong cushion to the external
balance. Electronic goods, petroleum products and engineering goods were among the major contributors
to merchandise export growth.

Industrial activity remained broadly supportive, although sectoral performance continued to be uneven.
The Index of Eight Core Industries grew by 4.8 per cent in August, led by cement, electricity, iron ore and
steel, while crude oil and natural gas production declined by 3.6 per cent and 4.9 per cent, respectively.
At the same time, private-sector activity strengthened in September, with the Composite PMI rising
to 56.5, Manufacturing PMI to 55.7 and Services PMI to 55.8, indicating a broad-based improvement in
business activity, output and employment. The strengthening of manufacturing and services activity
provides a positive signal for near-term growth, even as weakness in domestic hydrocarbon production
remains a concern.

The month also witnessed developments reinforcing India's medium- and long-term economic and
energy-transition prospects. Japan Credit Rating Agency upgraded India's sovereign rating from 'BBB+' to
'A-' with a Stable Outlook, recognising sustained economic growth, improved fiscal quality, stronger
financial-sector fundamentals and a resilient external position. Meanwhile, India's transition towards
renewable energy is expected to generate substantial investment opportunities, with more than ?4 lakh
crore estimated to be required for energy storage by FY2031–32, alongside significant investment in
transmission infrastructure. These developments highlight India's growing economic resilience while
underscoring the importance of energy security, infrastructure development, domestic energy production
and investment in emerging technologies for sustaining growth amid an increasingly uncertain global
environment.

As far as oil and gas industry is concerned, benchmark crude oil prices surged to their highest level since
May as negotiations between the United States and Iran to end the war in the Middle East remained at
an impasse amid renewed hostilities. ICE Brent futures traded at $105/bbl, up $21/bbl since the start of
August and 45% above pre-war levels, while physical benchmarks were significantly higher. However, the
rise in both crude futures and physical prices pales in comparison with those for refined products, where
market tightness is now most acute. Diesel/gasoil, which accounts for nearly 30% of global demand, saw
prices in the United States surpass the $200/bbl mark in early September, 94% above pre-war levels, with
Europe and Asia not far behind.

The widening differential between crude and refined products has pushed refinery margins to record
levels in the Atlantic Basin. Total oil exports from Gulf countries in August are currently estimated around
13 mb/d, nearly half their pre-war level. Crude losses appear to have narrowed to just below 45%,

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