Crude oil prices tumbled on Monday as the US announced conclusion of the negotiations with Iran and signing of a ceasefire agreement on Friday. Market sentiments eased as Trump hinted re-opening of the strategic water ways that was choked for more than 100 days. The agreement is expected to restore oil and gas supply through the Strait of Hormuz responsible for one fifth of the global oil trade.
Brent crude, the global benchmark fell $83 per barrel, while US West Texas Intermediate (WTI) crude dropped below $81 per barrel.
Why is crude oil important to India?
India which is the third largest oil consumer in the world imports more than 85 percent of its crude oil requirement. As a result, dampening of the crude oil supplies has a direct impact on the country economy and it’s positioning globally. Improvement in the crude oil prices reduces India’s import bill, lowers pressure on the Rupee improving its position. Conversely, a surge in the oil prices widens trade deficits and fuel inflation thereby plunging economy.
Oil marketing companies have increased the petrol, diesel and LPG prices in the recent months in view of the disrupted supply demand chain. According to experts, as tensions in the Middle East ease, lower crude oil prices will have a direct impact on the economies. However, the government according to them may not immediately decrease the price but, may retain it until the prices remain sustained. Though oil would begin passing through, the benefits would initially be narrowed to oil companies rather than radical deduction at fuel stations.
Experts also predict every $1 per barrel decline in crude oil prices can reduce petrol and diesel prices in India by roughly 50-60 paise per litre.