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State run Oil and Natural Gas Corporation (ONGC) expects crude oil prices to continue their upward trajectory in the backdrop of impending Iran sanctions and declining production in Venezuela.
Speaking at India’s largest exploration and production firm’s annual general meeting on Friday, Shashi Shanker, chairman and managing director said, “Within a period of two years, the trajectory of prices changed dramatically. A barrel of crude in early 2016 fetched just about $30; by the end of 2017 it had already more than doubled.”
A high crude oil price projection by ONGC that accounts for 73% of India’s oil and gas production comes in the backdrop of Brent crude oil spot prices breeching the $80 per barrel mark. S&P Global Ratings said in a recent report that the agency expected Brent price to be at $70 for the rest of 2018, $65 for 2019 and $60 for 2020.
Also, retail diesel and petrol prices in India continue to set new records every other day. Transportation fuel prices touched a new high on Friday, with diesel and petrol prices reaching Rs 74.42 per litre and Rs 83.22 per litre in Delhi respectively at state run Indian Oil Corporation’s outlets. Petrol and diesel now cost Rs 90.57 per litre and Rs 79.01 per litre.
Increasing tensions between the US and Venezuela, the US demanding an end to all imports of Iranian oil by early November and the rupee’s performance as Asia’s worst performing currency of the year have compounded the situation and put India, the world’s third-largest oil importer, in a difficult spot.
“Today Brent crude is selling over $75 a barrel and could go even higher as Iran approaches another era of sanctions and Venezuela grapples with rapidly declining oil production,” Shashi Shanker added. The international crude oil prices had registered an all time high of $147 per barrel in July 2009.
The cost of the Indian basket of crude rose to $81.23 a barrel on 27 September, according to Petroleum Planning and Analysis Cell. To this, taxes at the central and state levels are added, besides dealers’ commission, to arrive at the retail price. The Indian basket represents the average of Oman, Dubai and Brent crude.
With the US sanctions on Iran looming, Moody’s Investors Service has estimated around $500 million decline in earnings for Indian state owned refiners—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), on account of substituting crude oil imports from the Persian Gulf country.
According to Moody’s, India is one of the largest buyers of Iranian crude, accounting for about 30% of total crude exports from Iran during April to August 2018. Also, India imported 220.4 million metric tons (million MT) of crude oil in the year ended March 2018, out of which about 9.4% was from Iran. Between April and August 2018 India imported 94.9 million MT of crude, out of which about 14.4%, was from Iran. Exports to India accounted for 21% of Iran’s crude oil exports in fiscal year ended March 2018 and 30% from April to August 2018.
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