Oil Price Rout Is Good News for Importers

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

By Irina Slav – May 01, 2025, 7:00 PM CDT

Cheap crude is fueling growth in major importing nations like India, which is increasingly relying on discounted Russian oil.
Forecasts slashing oil demand due to trade tensions may be overstated.
Demand is already rebounding from lower prices—though uncertainty remains around the duration and impact of tariffs.

At the end of April, crude oil prices settled at the lowest in four years. The immediate reason was a report that Saudi Arabia was fed up with production cuts and was willing to give cheaper oil for a longer go. The other reason: Trump’s tariffs. Ironically, the tariff fear pressuring prices is related to economic growth prospects. Yet cheap oil is a great fuel for economic growth—which is why oil importers are happy. Exporters, not so much.

Reuters reported earlier this week, citing unnamed sources, that Saudi Arabia had no intention to cut more production to prop up prices. Instead, the kingdom was going to endure the lower prices for as long as they lasted.

“The Saudis are ready for lower prices and may need to pull back on some major projects,” one of the Reuters sources said. This would be an inevitable consequence of lower oil prices, which major producers such as Saudi Arabia need higher for their public spending plan. In Saudi Arabia’s case, the price level necessary for that spending is over $90 per barrel—which is not a price level that we are going to see anytime soon.

Importers, meanwhile, are happy with where prices are—and these prices are driving their economic growth. India is an excellent case in point. Over the last three years, India has become a major customer for Russian oil producers because of the discount at which Russian crude was trading amid the sanction barrage that the West imposed on Russia. Indeed, the country became India’s biggest supplier of crude, overtaking previous leaders Saudi Arabia and Iraq. In fact, in fiscal 2024/25, the total share of OPEC oil exports to India fell to an all-time low because of the influx of Russian crude.

While its cheap crude oil imports kept booming, India’s economic growth has been quite strong, too—despite a projected slowdown by the International Monetary Fund. The Fund last month revised down its projections for a host of Asian economies citing Trump’s tariff war. Yet even with the revision, India’s GDP growth is projected at over 6% for the fiscal year that started in April. Compared to that, the IMF sees EU growth at some 0.2%. Cheap oil means stronger growth.

Yet forecasts such as the IMF’s latest growth revision tend to affect trader decisions and, ultimately, prices. Bloomberg, for instance, this week cited recent forecasts by various agencies that cut oil demand projections because of the tariff war. One might even argue some of them were eager to make that cut and were looking for an opportunity. More specifically, the International Energy Agency lowered its oil demand outlook for the year by as much as 30%, saying, “We have lowered the economic growth assumptions that underpin our forecasts, leading to a 400 kb/d reduction in expected oil demand growth for the remainder of the year.”

The principal reason for all these revisions is trade disruption as a result of Trump’s tariffs. All these forecasters seem to assume that the tariffs are here to stay and wreak havoc on the economies of all involved. While it is a fact tariffs have already been disruptive, there is no reason to assume this disruption will retain its current intensity and extend over a longer period of time. After all, most countries that Trump hit with tariffs have signaled a strong willingness to make trade deals with the U.S.—including in energy.

While we wait to see how those forecasts will turn out, demand for oil is already rising thanks to the lower prices, per that Bloomberg report. And it is going to rise further until the price trend reverses, which is also inevitable at some point. For now, however, we seem to be far from that point.

By Irina Slav for Oilprice.com

Related News

Start typing and press enter to search