While crude oil prices have gone up sharply in recent months, India’s import bill has not risen as much. There is a $6-7 per barrel difference between the price of the benchmark Brent crude and that from West Asia, and India imports 70 per cent of its need from the latter region. So, the Indian crude basket has risen by much less.
Since India also exports refined oil, companies doing so are happy. “We are getting relatively cheaper crude. This larger differential means stronger refining margins for Asian refiners,” said an official with a leading crude oil refinery in India.
India’s oil basket comprises Oman-Dubai sour grade and dated Brent sweet crude in a 67.6:32.4 ratio. The price of India’s oil basket has averaged at $112.32 a barrel in May, against $118.46 in April. Brent crude oil averaged $123.5 in April; in May so far, it has been $116.16 per barrel.
The difference between crude oil sold on the Nymex (New York Mercantile Exchange, the world’s largest physical commodity futures exchange) and Brent crude oil has also been widening. Over the past two months, the differential of Brent over Nymex has widened from $9-10 a barrel to $14-15. Crude oil inventories in the US are at a historical high of 50 million barrels and Nymex prices are not rising at the speed with which Brent prices are moving up. The Nymex futures contract is used as a principal international pricing benchmark for crude oil prices.
Crude oil prices in general are forecast to stay high and the latest Monthly Oil Market report from International Energy Agency (IEA) says crude oil prices in general will average around $110 a barrel in 2011 compared to $80 in 2010. Emerging markets’ demand will grow much faster than in the western world. In the latter, says IEA, high prices have started hurting demand.
The IEA says total oil product demand in industrialised countries will fall this year by 230,000 b/d, a decline of 0.5 per cent. While, growth in the developing world will be 1.5m b/d, a rise of 3.6 per cent. This would translate into global demand growth of 1.5 per cent this year, less than half the 3.3 per cent rise in 2010.
