Amid geopolitical concerns, oil prices fell for the third straight day on the global market on Wednesday. This is because the US Federal Reserve is not likely to lower interest rates anytime soon due to the country’s high rate of inflation. The benchmark Brent crude price has now dropped from around $84 per barrel at the end of last week to $82.28 per barrel.
The latest trade of US West Texas Intermediate (WTI) futures at $78.02 suggested that prices were continuing to decline. Given that about 85% of India’s petroleum needs are imported, the drop in oil prices lowers the nation’s import bill and strengthens the rupee.
In addition, the government has contributed to lowering the cost of the nation’s oil imports by permitting the oil corporations to acquire Russian crude at a reduced price, in defiance of Western efforts to halt such purchases following the conflict in Ukraine.
Russia replaced Saudi Arabia and Iraq as India’s leading suppliers of crude oil, taking the position previously held by them. In actuality, India has emerged as Russia’s top buyer of maritime oil, making up about 38% of India’s total imports of oil in April.
In reality, during the first 11 months of the fiscal year 2022–2023 India saved almost $7.9 billion on oil imports thanks to its strategy of continuing to purchase inexpensive oil from Russia, which also assisted the nation in reducing its current account deficit.
Despite the Western sanctions imposed on Moscow, the Narendra Modi administration has been steadfast in upholding its connections with Russia. These significant purchases of Russian oil have also helped to keep prices in the global market at more acceptable levels, which has benefited other nations as well, as India is the third-largest crude importer in the world.
According to data gathered by the Ministry of Commerce and Industry, the percentage of crude oil imported from West Asian nations (Saudi Arabia, the United Arab Emirates, and Kuwait) decreased to 23% from 34% in the first 11 months of FY2024, while the percentage from Russia increased to 36% from 2% in the same period the previous year.
The oil import expense was significantly reduced as a result of the Russian oil discounts. In FY2023 and the first 11 months of FY2024, the imputed unit value of imports from Russia was 16.4% and 15.6% less than the equivalent amounts from West Asia, respectively, according to an ICRA report.
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