Crude Oil Price Rises on International Market, India's Woes Increase
Crude oil prices have risen towards $100 per barrel due to a supply cut by Saudi Arabia and Russia. The move is expected to further stoke inflation and widen India”s trade deficit, as the country imports 83% of its crude oil for domestic use.
Experts attribute the rise in prices to the production cut by Saudi Arabia and Russia, as these nations want to stabilize prices. According to Toshitaka Tazawa, an analyst at Fujitomi Securities Co. Ltd., “With the narratives of supply fears and fall in demand, the market faces uncertainty. There may be a dent in demand due to the hawkish stand and rate hike by the US Federal Reserve and European Union Central Bank, respectively.”
According to Tazawa, in the future, investors may pay attention to the OPEC+ action to know if they would stick to the production cut decision or not. If they implement the decision further, that will further raise the price. Tazawa predicts WTI might trade in a range of around $90-$95.
Russia has temporarily suspended exports of gasoline and diesel to all countries outside a select group of former Soviet states, effective immediately, in a bid to stabilize the domestic fuel market. The move, which will force Russia”s fuel buyers to look elsewhere, caused heating oil futures to surge by nearly 5% on Thursday.
The US Federal Reserve, meanwhile, kept interest rates unchanged on Wednesday, but adopted a more hawkish stance, projecting a quarter-point increase to 5.50-5.75% by the end of the year.
The Indian government is taking steps to mitigate the impact of the rise in crude oil prices, such as increasing ethanol blending in gasoline and reducing the import duty on crude oil. However, these measures are unlikely to fully offset the impact of the rising prices.
Indian consumers and businesses are likely to bear the brunt of the rise in crude oil prices. Inflation is expected to rise further, and businesses may be forced to pass on the higher costs to consumers. This could lead to a slowdown in economic growth.
