Crude oil up 40% since January, may mean trouble for government during 2015

Crude oil has soared above $67 a barrel, rising 40% since January to the highest in 2015 amid expectation that the market would be tighter in the second half of the year, increasing fears fuel prices may start hurting the people and the government at home again.

Upturn in oil has already prompted state firms to increase petrol rates by about Rs 4 a litre, the biggest increase in three years. Global prices have soared from six-year low of $45.19 in January. Slowly shrinking global supplies and expectations that Chinese demand may revive after weak factory activity reinforced the case for a policy stimulus to boost the world’s second-largest economy have supported oil prices. Slowing Asian demand, a supply glut and the refusal by oil cartel OPEC to cut output to retain market share had contributed to a 60% fall in oil prices between June and January. A collapse in oil prices had largely helped the Narendra Modigovernment almost win the war over inflation lately but it may dramatically reverse within months if the current crude march were to continue.

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Posted in: Indian Market Tips