Rising Oil Prices May Deliver a ‘Crude’ Shock

OILMONSTER.COM- India may be in for a 'crude' shock this year if prices of crude oil keep hitting new highs. The commodity has been appreciating in value, largely on the back of geopolitical tensions.

Oil prices on Thursday rose to their highest in over three years as US crude inventories declined and the world's largest oil exporter Saudi Arabia continued to withhold supplies. The price of Brent crude has hit multiple new highs over the past few sessions and is currently trading at around USD 74 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC), and its partners in a supply reduction pact, are scheduled to meet in Jeddah, Saudi Arabia, on April 20. The body is also slated to meet on June 22 to review its oil production policy.

OPEC, and a few other major oil producers, including Russia, started to withhold oil production in 2017 in order to rein in the supply glut that had kept oil prices low since 2014. Reuters reported on Wednesday that Saudi Arabia would be happy to see crude rise to USD 80 or even USD 100 a barrel, which indicated that Riyadh is not thinking about taking a step back on its decision to cut supply.

"The recent spike in crude prices is largely due to sudden spurt in geopolitical tensions in Middle East. Spike in oil prices above current levels can attract higher supply from US (Shell Oil). Considering this, oil prices are likely to be in the range of USD 60-70 in the medium term," said Vinod Nair, Head of Research at Geojit Financial Services.

Market participants are, in fact, worried that the commodity will continue appreciating to new highs, which would spell trouble for Indian markets.

One such participant is Atul Suri of Marathon Trends, who told CNBC-TV18that crude is the biggest dark cloud for India as it is on a bullish trajectory. "No one saw crude at USD 70 per barrel when it was trading around USD 50-55. It would not be a surprise if crude hits USD 90 per barrel," he told the channel.

Courtesy: www.moneycontrol.com