Crude oil prices fell to a five-month low of below $106 per barrel on Tuesday as Hurricane Gustav did not cause as much damage to oil installations in US Gulf as was feared earlier.
India, which imports 75 per cent of its oil consumption, may see its oil import bill coming down by $ 20 billion than earlier projected amount of $ 100 billion when the oil was at its peak at $ 147 per barrel two months back. For state-owned oil companies, which are selling petroleum products at a subsidised rate, will also reduce their daily loss to below Rs 350 per day from the current Rs 400 crore per day.
Users like Airline industry, power utilities and industries that use oil products to power their back up generators will also benefit from lower crude oil prices. However, airline companies did not pass on the benefit of lower jet fuel prices, which was decreased by 16 per cent two days back, saying that they continue to make loss at the current level and wanted further fall in fuel price. Meanwhile, Bombay Stock Exchange’s Sensex reacted positively to lower oil prices, as fears of further increase in interest rate by the central bank eased. The Sensex, which consists of 30 stocks, closed 551 points higher.
“The under-realisations of the oil companies will drop to below Rs 350 crore per day if oil prices stay at the current level of below $110 per barrel,” said a senior official with Indian Oil Corporation (IOC), which supplies over half the fuels the country consumes. After falling below $ 106 per barrel, oil prices rose to $ 108.35 per barrel in New York Mercantile Exchange, still down over seven dollars from Monday’s close.
Analysts say crude oil prices may fall below $100 per barrel in the next 10 days as demand from China has fallen after the Olympics, and slower economic growth in the US and Europe have moderated consumption. “Pressure may however come from lower oil production from Russia,” said a Mumbai-based analyst.
Organisation of Petroleum Exporting Countries (OPEC), an oil cartel controlling 40 per cent of the World’s oil supplies, is meeting on September 8, 2008 and is likely to take stock of current price and production levels. Opec uses production control as a tool to control prices.
