Indian basket breaches $100/bl

US oil hits $109 as weakening dollar spurs investments in commodities.

The basket of crude oil that Indian refiners buy has breached the $100 per barrel-mark for the first time, touching $100.17 on Monday, the latest day for which data is available.

The price of the basket has more than doubled from the $49 per barrel it recorded on January 19, 2007. 

THE LAW OF AVERAGES Average price of Indian crude oil basket ($/bl)
Year
Mar '05	47.22
Mar '06	60.01
Mar '07	60.26
Jan '08	89.52
Feb '08	92.37
Mar '08 (so far)	98.46
Source: Indian Oil website *Data for January 2007 was unavailable when the price dipped to $49/bbl in one session

US light sweet crude oil for April delivery rose to a fresh record high of $109 a barrel on Tuesday. The Indian basket of crude oil, which comprises Oman-Dubai sour grade crude oil and Brent dated sweet crude oil in 61:39 ratio, is tracking the global prices, hitting record highs for the fourth straight day.

"This is the election year. High oil prices will not result in a fuel price hike this financial year and most of the next one," said a senior official in the petroleum ministry.

A Delhi-based analyst said that a weak dollar has led investors to pump money into commodities, leading to record high oil prices. "It can go anywhere from here. Even $150 a barrel looks possible," the analyst added.

As a result of high crude oil prices, government-owned oil marketing companies are losing around Rs 410 crore a day as they are not able to raise retail prices of petrol, diesel, LPG and kerosene in line with global prices.

The high retail losses of these companies has already wiped out the positive impact of the increase in prices of petrol by Rs 2 per litre and diesel by Re 1 per litre in just a fortnight.

The average price of the Indian basket in March now stands at $98.46 per barrel, which is over 60 per cent higher than the average price of $60.26 per barrel recorded in the same month last year.

Oil futures in New York rose to a record for a fifth day, rising above $109 a barrel.

The euro rose to $1.5489 against the dollar, the highest since the single currency's introduction in 1999, after European Central Bank council member Axel Weber said he didn't see any leeway to lower borrowing costs.

"The weaker dollar has attracted a lot of investors into oil," said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. "At the same time, emerging market demand is strong."

Crude oil for April delivery rose as much as $1.30, or 1.2 per cent, in electronic trading on the New York Mercantile Exchange.

The contract traded at $108.77 a barrel at 11:06 a.m. London time.

Brent crude for April settlement also rose to a fifth consecutive high, gaining as much as $1.24, or 1.2 per cent, to $105.40 a barrel on London's ICE Futures Europe exchange.