OPEC+ is shifting its focus from defending a price floor to ensuring oil availability as the Strait of Hormuz remains only half-normalized, according to Anindya Banerjee, Senior Vice President and Head of Commodity Research, Currency, Commodities and Interest Rates at Kotak Securities. Banerjee sees Brent crude staying below $85 per barrel as beneficial for India, but warned that full normalization of Hormuz over the next six to nine months could push the market into a “perfect storm” of surplus if OPEC+ continues rolling back production cuts amid weak demand.
Supply-Side Dynamics and OPEC+ Internal Divisions
Banerjee noted that OPEC+ faces a fragmented and challenging environment. The alliance, which combines the 12 core members of the Organization of the Petroleum Exporting Countries (OPEC) with 11 non-member nations including Russia, has struggled to enforce quotas. “Since Covid they had to cut back… first 2 million barrels, again And then they had to ensure every member adheres to that. That was a huge challenge. And now we have seen how the OPEC is fragmented. UAE has stepped out. Iraq is saying that we want a higher quota,” Banerjee said.
Despite official cuts of around 6 million barrels per day (bpd), the market had an estimated 2-3 million bpd surplus before the Hormuz crisis, according to Banerjee. Currently, 5-6 million bpd remains offline due to the Strait of Hormuz disruptions, acting as a floor for prices. The recent rollback announcements by OPEC+ are, according to Banerjee, “more of a sentimental thing” to cap prices.
| Metric | Value |
|---|---|
| Official OPEC+ cuts | ~6 million bpd |
| Pre-crisis market surplus | 2-3 million bpd |
| Current offline capacity (Hormuz) | 5-6 million bpd |
| Tanker transits (pre-crisis, good month) | ~2,000 |
| Current tanker transits | ~1,000 |
Geopolitical Risks: Strait of Hormuz Normalization
The Strait of Hormuz, a critical chokepoint for global oil shipments, remains only partially operational. Banerjee stated that on a good month about 2,000 tankers used to transit the strait. “Now it is still, I would say on a very good day, you are able to do half of that.” Empty tankers need to return and shipping companies need comfort, so full normalization will take 6-9 months. “If things were to come back online completely over the next six to nine months in Hormuz, this oil prices would crash,” Banerjee said, adding that a resolution in Ukraine and Russia’s return could add more supply just as demand lags.
Demand and Price Outlook: Benefit to India
For India, lower oil prices are a net positive. “India is very well-placed because… with the current dynamics which is playing out the lower oil prices which is going to be quite beneficial to us,” Banerjee said. He noted that inflation pressures start to build only if Brent goes above $85. Gas markets remain tighter and won’t crash like oil due to logistics constraints, though Qatar supply should improve over six months.
Rupee Outlook and RBI Policy
On currency, Banerjee sees the Indian rupee with a “great taping till September.” His base case is USD-INR at 92-93, with a pessimistic dollar scenario at 90-91, supported by the Reserve Bank of India (RBI) opening the debt market to Foreign Portfolio Investors (FPIs) and potential $50 billion+ inflows from Foreign Currency Non-Resident (FCNRB) and External Commercial Borrowings (ECB) deposits offering 7 per cent+ rates to Non-Resident Indians (NRIs). However, the RBI may intervene to rebuild reserves, limiting appreciation.
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