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Friday, April 16, 2021

Crude oil prices plummeted to a two decade low. What it means for India?

Once upon a time, crude and oil was an unsaid luxury. But suddenly, oil touched its two-decade low, right after the United States’ may futures sank negative. All this happened due to the slapping effect of the corona virus crisis.


It is a good news for Indian Oil Marketing Companies:

A public sector oil company said that this is an incident that will affect only the region of the US and the global production and exploratory companies, but the refiners will not be affected.

There is a possibility that all this fall and negative prices in the United States’ oil companies might prove good for the Indian domestic companies.

The Indian oil companies are going to gain as the Indian Oil Marketing companies are gaining Rs. 13 per liter as margin on both petrol and diesel. Now that the price of oil has fallen, if these oil marketing companies sell the produce at the same price or even a bit lower price, then also they would make a marginal profit. And that would be greater than the previous marginal profit that is Rs. 13. One Indian research analyst said that a $1 fall per barrel increases the net margins by Rs. 0.45 per litre on both petrol and diesel.

Petrol Bunk at the Roadside
Petrol Bunk at the Roadside – By Shutterstock.com/ Ikhwan Ameer

It might seem good to India as the economy will have a positive effect, but the overall outlook for crude oil might remain grim due to the pandemic situation.

The world requires about 100 million barrels per day. The director of CRISIL Research on prices told that there is a high possibility that the demand for crude oil might decline as much as about 20 million barrels a day. The price of oil in the next quarter is also expected to be at lower points.

The price has fallen and demands have reduced due to the coronavirus effects. Now, it is much likely that the reduction in demand will require more storage space. Since there is a lack in the storage area, it will also impact the price of the crude.

Therefore, the refining companies are in a positive situation as they just have to buy the crude according to their requirement, and since the price are so low, they can sell it at better margins.

Price may get stable in the coming time. No one knows what the future holds. None the less this is a good news for the Indian economy and various sectors struggling due to corona pandemic.

US Crude Oil Touches Two-decade Low (1)

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