IEA says crude oil prices may rise further in 2018; India’s July bill comes in higher

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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.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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