InvestorQ : Why has crude oil prices been going up in the last few days and what does that mean for India?
Aashna Tripathi made post

Why has crude oil prices been going up in the last few days and what does that mean for India?

3 years ago


OPEC is cutting production in a Bid to Boost the Oil prices.

OPEC members along with several non- members allies, agreed this week to reduce their oil supplies by an additional 5,00,000 barrels per day(BDP) starting in January.
This cut is on top of an output curb of 1.2 million BPD
The group agreed to in October 2018.

This is positive development for the oil market as it will help to keep supplies at or below demand,which has been growing at a slower pace because of the trade war between U.S. AND CHINA .

Due to this news flow crude oil has already touched 12 week high .

Alot more upside is pending as per this news flow and technical analysis but always work with stoploss.

How it effects indian market:

Well india is developing country and we are still the 3rd largest consumer of crude oil. So a slight hike in price of crude oil affects us alot.

We are trying to adapt green energy (such as solar , EV's) but still our infrastructure is not that developed.

Hence conclusion:

Crude oil prices might hike more from their current levels and it will affect India market alot.


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Tisha Malhotra answered.
3 years ago

Crude oil prices have recently above the $64/bbl mark and most oil analysts are expecting the price of oil to move above the $70/bbl mark in the next year. This rise in oil prices has been driven by two reasons. Firstly, there has been some unrest in the Middle East and since most of the key oil transportation routes are in the Middle East, it raises concerns over oil supply. This is an acute problem for India as India still relies heavily on imported to the tune of close to 85% of its daily needs. The second reason the price of oil has shot up is that in the last OPEC meeting the OPEC members and Russia agreed to increase daily supply cuts from 1.2 million bpd to 1.7 million bpd. This is likely to substantially restrict supply of oil in the market and push up prices. In the meanwhile, if the US-China trade deal also happens and demand picks up, then the price rise in oil could be much sharper.

For India, there are concerns at multiple levels. Firstly, higher oil prices would mean that the OMCs will pass on the higher costs to the consumers and that will raise the price of petrol and diesel. Such a hike in price is normally inflationary. Secondly, a sharp spike in oil prices will mean widening of the trade deficit and the rupee/dollar may come under pressure. Rupee weakness normally has larger implications for FPI flows. Lastly, higher oil prices will mean higher inflation, in which case the RBI may not too keen to cut repo rates even in its February meeting. Overall, higher oil prices will be negative for India.