NEW DELHI: Global crude oil prices extended losses on Friday after Russia assured to fulfill its supply obligations.
At 0910 am, the May contract of Brent on the Intercontinental Exchange was at $109.03, down 0.27% from previous close. The April contract of West Texas Intermediate (WTI) was a tad higher at $106.18 per barrel.
Russian president Vladimir Putin has said that the country will continue to meet its contractual obligations on energy supplies. Also, the European Union not imposing of ban on Russian oil kept prices under pressure.
Russia is second largest crude exporter in the world behind Saudi Arabia, shipping out about 3 million barrels per day of crude to Europe’s OECD countries.
In a recent interview, Josep Borrell, high representative of the European Union and vice president of EU Commission, said the EU will not impose a ban on Russian oil and gas because of its heavy dependence.
Earlier this week, the US announced to ban on import of Russian oil and the UK said it would phase out shipments from the country by the end of 2022. This had led to concerns that the European Union may follow suit.
Oil prices, which soared to near-record levels following Russia’s invasion of Ukraine, have cooled down over the past couple of sessions.
On Monday, Brent hit touched $139.13 a barrel, the highest since 2008. On Wednesday, prices, however, fell after the United Arab Emirates, a member of the Organization of Petroleum Exporting Countries (OPEC), said it favoured high oil production by the cartel.
High oil prices are cause of concern for India as the country imports 85% of its oil demand. The rise in crude over the past few weeks have pushed up the price of Indian energy basket, comprising Oman, Dubai and Brent crude. It was last recorded at $128.24 per barrel on 9 March, according to data from the Petroleum Planning & Analysis Cell of the Ministry of Petroleum and Natural Gas.
Although, the increase in crude oil prices has not been transferred to consumers so far, with retail fuel prices unchanged for over four months now, market experts believe that oil marketing companies may raise prices going ahead.
On Friday, the retail price of petrol was unchanged ₹95.41 a litre, while diesel sold for ₹86.67 per litre in the national capital.
High crude prices will also impact India’s current account deficit (CAD) to a great extend given its dependence on imports. An Icra report recently said CAD is likely to widen by $14-15 billion (0.4% of GDP) for every $10 barrel rise in the average price of the Indian crude basket.
“If the price averages $130/bbl in FY2023, then the CAD will widen to 3.2% of GDP, crossing 3% for the first time in a decade,” it said.
Mint had earlier reported that the government is assessing the evolving geopolitical situation and will decide on cutting excise duty on fuels if the current surge in crude price lingers longer than can be absorbed by state-run fuel retailers.
The Icra report had said that if the Centre reinstates the excise duty on petrol and diesel to pre-pandemic rates, before 1 April 2022, followed by the budgeted rise of ₹2 per litre each on unblended fuel in H2 FY2023, the estimated revenue loss to the Centre in FY2023 would be around ₹90,000 crore.