The sharp fall of crude oil prices are a hot topic of debate in news and current affairs as on 20 April the market saw a historic low of crude oil ending at a negative $37.63 a barrel and how people are wondering how it might effect India? Keep on reading as here we will explain the whole scenario and its impact if any in a simple manner.
What has actually happened with Crude Oil Prices?
Due to coronavirus pandemic, the worldwide demand for crude oil prices saw historic fall as U.S. oil prices fell below zero for the first time ever. West Texas Intermediate, which is the key U.S. oil benchmark settled at negative $37.63 on 20 April. Surprisingly thats true that sellers were actually willing to pay buyers to take the crude oil off their hands has there is a lot of unused oil sloshing around American energy companies and they have facing challenges with storage.
"Did you Know? In this pack you will get All new content we launch in the next 1 months"
This is the most recommended and NRA-CET ready Pack!
Use Code 'DREAM' to avail at the best price today
This package Includes IBPS PO Study Material - Subscribe Now
About Bank Mahapack
If you are preparing for more than 1 Banking & Insurance exams then this is the pack we recommend you buy.
It is most cost-effective and you get access to 100% digital content for Bank & Insurance exams on Adda247.
Banking & Insurance Exams Covered in this Pack
Additionally, you can crack any private bank job exam with content in this pack.
Bank & Insurance Mahapack Highlights
- Structured course content
- Recorded classes available if you miss any live class
- Previous Years’ Papers of all upcoming exams.
- Full Length Mocks based on the latest pattern with detailed solutions (video solutions for certain topics)
- Topic level knowledge tests
- Strategy sessions, time management & Preparation tips from the experts
Validity: 1 Month
- Unlimited Live Classes & Recorded Video Courses
- Unlimited Tests and eBooks
- 1 Lakh+ Selections
- 15 Months
- 9 Months
- 3 Months
- 27 Months
- 1 Month
|Coronavirus Case Count in India||Success Story||Different Types of Bank Loans in India||SBI PO Prime 2020 Online Test Series|
WTI has crashed but not the Brent Crude
It is important to note that India imports primarily from OPEC countries, thus Brent is the benchmark for oil prices in India.
So, the thing here to take into account is that India’s crude basket includes oil from Oman, Dubai and Brent crude, not WTI. The sharp low in the crude oil prices that have become the hot topic in news id mostly relevant to the local US, Canada and Mexican markets. Brent crude is extracted from the North Sea, WTI is usually extracted from US oil fields in Texas, Louisiana, and North Dakota.As per the Buisnesstoday, “Brent crude, which is what India buys has also seen a fall of about 5%, but prices are still hovering around $27 a barrel. It’s not as cheap as the WTI, which is the benchmark US oil.”
Rupee has fallen sharply against US dollar
There is another twist to the story as taking into the account that Indian Rupee is trading weaker than Dollar, even if India were to import oil from WTI the bill will be in dollars and the currency exchange differnce in the Rupee-Dollar difference will offset gains from lower crude oil prices.
Storage Capacity Issue
Hypothethically assuming if India was interested to buy WTI oil, practically for no cost at all of purchase, even then India is in short of storage capacity. As per reports, the total capacity available for storage is just 5.33 million tonnes (enough to meet 9.7 days of requirement) and the rest of the storage capacity is not ready. Also due to the COVID-19 pandemic, India in under a lockdown and all economic activities have come to a stand still, which in terms means there is no significant demand and Indian oil refiners have the existing stock.
|What is a Debenture?||Credit Rating Agencies in India||IMF releases “World Economic Outlook”|