With Russia and Saudi Arabia announcing that they will increase crude oil production to overcome any shortage due to problems in Venezuela and Iran, the commodity’s prices have begun to cool.
Crude oil prices, which hit a recent high of $80 a barrel resulting in prices for petrol in India increasing above Rs 80 a litre, have slumped with Brent crude oil rates at $73.44 on Friday. Last weekend, prices for Brent crude ended at $76.75 a barrel.
Apart from the Russian-Saudi Arabia factor, crude oil prices have been dragged down by rising production in the United States which rose to 10.9 million barrels a day last week. It will likely hit the 11-million-mark soon. Increase in US crude oil production has been aided by countries in Asia, particularly India, purchases. Last year, India began buying crude oil from United States to diversify its fuel basket.
Russia has been clear that a price level of $60 a barrel is comfortable for it. Saudi Arabia, too, is of the view that it should maximise its gains when prices are ruling above $60. While internal problems have forced Venezuela to cut production to one fifth from a daily output of 2.5 million barrels, Iran could face problem in view of the United States scrapping its nuclear deal with it. Hopes of the market that the oil cartel Organisation of Petroleum Exporting Countries (OPEC) could hike its production by at least one million barrels at its 22 June meeting are also exerting pressure on the market.
For India and its citizens, the drop in prices is good news. Expensive fuel pushed up inflation in May this year to 4.43 per cent. Higher crude oil prices led to India’s fuel import bill rising 49.46 per cent in May while widening trade deficit to $14.62 billion.
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