Crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world — including Iran sanctions and drop in Venezuela’s production, according to the International Energy Agency (IEA).
The world may “unfortunately see a further tightening of markets” towards the end of this year, which will in turn put upward pressure on prices unless the Organization of the Petroleum Exporting Countries (OPEC) go for a significant increase in production, Fatih Birol, the IEA Executive Director, was reported as saying during a visit to India.
This comes at a time when international benchmark Brent crude price was seen at $77.38 a barrel on Thursday inching closer towards $80-mark on signs that Iran sanctions may limit global supply, while the US West Texas Intermediate (WTI) crude was seen at $ 69.84 a barrel at one point.
The Indian crude oil basket was seen at $74.75 a barrel on August 30, which is almost 8 per cent higher than the monthly average of $69.22 a barrel in the month of April.
Rising prices are a cause of concern for India as the country had budgeted an average crude oil price of $65 a barrel for the current financial year, based on which the import bill was supposed to be around $109 billion, compared to $88 billion in 2017-18.
Thanks to rising prices of crude, India’s crude oil import bill swelled 76 per cent to $10.2 billion in July as compared to the corresponding month a year ago, widening trade deficit and adding pressure on the fiscal deficit for the month.
The increase in oil import bill was a result of 53 per cent rise in Brent — the benchmark for half the world’s crude — to $74.35 per barrel in July as compared to $47.86 per barrel during the corresponding month last year.
India meets over 82% of its crude requirement through imports. The sharp rise in the country’s crude oil bill led to its trade deficit widening to a 62-month high in July, which increased to $18.02 billion, up from $16.61 billion in June.