Oil on the boil: Prices, demand-supply dynamics, and the way ahead

Brent crude, a benchmark for nearly 80 per cent of global crude oil trade, crossed 80 dollars a barrel on Tuesday. And some agencies like Goldman Sachs are estimating that crude oil will hit 90 dollars a barrel by the end of this year. This may have implications for India, which has a major import dependence for meeting its energy needs.

For one, the government's fiscal maths will be tested by this oil-price rally. A further surge would put pressure on it to cut taxes on petrol and diesel which would hurt its revenue and spending. 

Secondly, as the rally pushes domestic petrol and diesel prices to new highs, consumers and industry will also be hurt.

And thirdly, in the more immediate terms, there will be a clear impact on Indian stock markets, too. On Thursday, the markets are expected to take cues from oil prices, besides global markets and how bond yields play out. Also, the derivative expiry for the September futures & option (F&O) series is going to impact the trading sentiment on Thursday.

So, coming back to oil, what is fuelling this global surge in prices? And what’s the road ahead? Up to what level may the prices rise? And what will be its impact? 

Puneet Wadhwa spoke to Dr Kang Wu, Head of Global Demand and Asia Analytics, S&P Global Platts. Here are the highlights of Dr Wu’s answers: