The Indian basket of crude oil price has plummeted to $47.98 a barrel, the lowest in more than six months : 20 Aug 2015


The Indian basket of crude oil price has plummeted to $47.98 a barrel, the lowest in more than six months, as global benchmarks continued their slide due to higher US stockpiles and production volumes, coupled with a rout in the Chinese equity market, dampened demand. The subdued sentiment was firmed up also on the prospect of Iran increasing production, with the lifting of sanctions, and the insistence of the Organization Of Petroleum Exporting Countries (OPEC) to not cut production from the current levels of 32 million barrels per day (mbpd). Brent crude for October delivery eased 23 cents to $48.58 a barrel on the New York Mercantile Exchange. The price of the Indian crude basket was the lowest since January 30, when it stood at $46.73 a barrel. Between April 1 and August 18, the price had averaged at $57.26 a barrel. K Ravichandran, senior vice-president at research and ratings at ICRA, said: "The government had budgeted for an average price of $70 per barrel for this financial year. If the average price of $57 per barrel is sustained for the rest of the year, it will lead to Rs 84,500-crore savings in import bill and Rs 11,700-crore savings in the subsidy bill." Currently, every $1 decrease in crude oil price pulls down import bill by Rs 6,500 crore and the government's subsidy burden by Rs 600 crore. However, the benefit would be limited due to the ongoing depreciation in the rupee. Every Rs 1 increase in the exchange rate of dollar increases oil import bill by Rs 7,455 crore, according to the Petroleum Planning and Analysis Cell (PPAC), an arm of the oil ministry. The ongoing dip in crude oil prices will lower under-recoveries for refiners and translate into reduced subsidy burden sharing for upstream companies such as Oil and Natural Gas Corp. The government had exempted upstream firms from liquified petroleum gas subsidy sharing. It also said it would bear subsidy of upto Rs 12 a litre and anything over that would be borne by these firms. For Indian refiners - Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp - the declining crude oil prices are a major positive as their working capital requirements would reduce along with lower losses on subsidised sale of petroleum products. The under-recoveries of oil marketing companies came down from Rs 139,869 crore in 2013-14 to Rs 72,314 crore the last financial year - thanks to diesel deregulation and the roll out of direct benefits transfer in LPG scheme. In the current financial year, the government was budgeting for a petroleum subsidy bill of Rs 30,000 crore, including Rs 22,000 crore on LPG sales and the rest on kerosene. The government might now be able to save Rs 7,800 crore of these due to the decline in crude rates. India imported 189 million tonnes of crude oil at $112 billion in 2014-15. With lower crude oil prices slated to create Rs 84,500-crore cushion for importers, OMCs might pass on the benefit to consumers by reducing retail prices of petrol and diesel.

( Source : BS )
The Indian basket of crude oil price has plummeted to $47.98 a barrel, the lowest in more than six months : 20 Aug 2015 The Indian basket of crude oil price has plummeted to $47.98 a barrel, the lowest in more than six months : 20 Aug 2015 Reviewed by Money99 on 17:03:00 Rating: 5

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