Oil Prices Ease as UAE Calls for Higher Manufacturing

On Wednesday, the May contract of Brent futures on the Intercontinental Exchange (ICE) settled 13.2% lower at $111.14 per barrel. It was the biggest decline in a day since April 2020.

• UAE said it favored production increases and will be encouraging OPEC to consider higher production levels

New Delhi: Global crude oil prices eased from multi-year highs after the United Arab Emirates (UAE), a member of the Organization of the Petroleum Exporting Countries (OPEC) said it was in favour of boosting production.

On Wednesday, the May contract of Brent futures on the Intercontinental Exchange (ICE) settled 13.2% lower at $111.14 per barrel. It was the biggest decline in a day since April 2020.

Around 9 am on Thursday, Brent was trading at $112.81, lower by 1.50% from its previous close.

The April contract of West Intermediate Texas (WTI) on the NYMEX was, however, 0.41% higher at $109.15 a barrel.

In a tweet, the UAE embassy in the US quoting Ambassador Yousef Al Otaiba's statement to Financial Times said: “We favor production increases and will be encouraging #OPEC to consider higher production levels."

Analysts said that the statement calmed nerves in the highly volatile crude oil market.

UAE's statement gains significance as recently, OPEC+, a group of OPEC and other major oil producing countries, including Russia, decided to maintain an increase in output by 400,000 barrels per day (bpd) in March, despite the price surge to record highs. The cartel resisted demands to accelerate the daily production of crude.

Oil prices eased after prices of the commodity spiraled to multi-year high levels since Russia invaded Ukraine. On Monday, Brent had touched $139.13 per barrel, the highest since 2008.

Rising oil prices are a cause of concern for India as the country imports 85% of its oil demand. The recent incessant rise in global crude prices have lifted the Indian energy basket, comprising of Oman, Dubai and Brent crude. It was last recorded at $126.55 per barrel on March 8, 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 the consumers so far as the retail fuel prices have been unchanged for over four months now, market experts believe, with mounting pressure of high oil prices on oil marketing companies, retail fuel prices may be sharply increased going ahead.

On Thursday, the retail price of petrol was unchanged ₹95.41 a litre, while diesel was sold for ₹86.67 per litre in the national capital.

The incessant rise in crude prices would also impact the current account deficit (CAD) to a great extent given India's import dependence for its energy requirements. An ICRA report recently said that the 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 said that if the Centre reinstates the excise duty on petrol and diesel to the pre-pandemic rates, before April 1, 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.

( Except for the headline, this story has not been edited by Scrabbl staff and is published from a syndicated feed.)