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Moneycontrol Pro Panorama | The pot boils for oil, will India feel the heat?

In today’s edition of Moneycontrol Pro Panorama: Automakers back in the driver’s seat, this stock looking for old shine, RBI surveys paint a different picture, litmus test for India’s foreign policy, the L factor in Congress election and more  

October 03, 2022 / 02:24 PM IST
Representative picture

Representative picture


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Crude oil prices are rising again as the oil production group the Organisation of Petroleum Exporting Countries weighs a production cut.

In the quarter ended September, Brent crude prices had fallen by more than 20 percent as fears of a recession loomed. But prices have climbed by close to 3 percent today morning and Brent is nudging $88 a barrel as international publications reported that the Opec ministerial meeting in Vienna this Wednesday could see the cartel cut output by as much as 1 million barrels a day, the sharpest since the COVID-19 pandemic.

Why would OPEC want to cut production? For two reasons, per an FT report. One, is to prop up prices and revenues, and the second, to keep some production capacity in reserve when the US and EU sanctions hit Russian oil in December. The EU has banned sea-borne imports of Russian crude from December 5 and an oil price cap — agreed to by G7 nations — is also likely to kick in.

On the top of this, Saudi Arabia may institute a further unilateral output cut, the FT report said.

The output cuts will squeeze supply at a time when demand may not fall by much, recession or not.

Indeed, JP Morgan, in a report last week had predicted that oil prices were headed to $100 a barrel because oil demand was bound to rise as customers switch from more expensive gas.

It also warned that US strategic petroleum reserves are the lowest in several years crimping America’s ability to meet the supply shortage by releasing these inventories. The US investment bank also said it sees the US-Iran nuclear deal — which could add a further million barrels a day output — as unlikely to fructify.

All this means that it might not be far ahead when Brent crude prices again test $100 a barrel. For India, this is not good news as rising crude and stronger dollar make imports costlier and raise domestic inflation. However, current estimates of inflation do seem to have factored this rise expected rise in prices. Last week, in its monetary policy statement, the Reserve Bank of India had said it was assuming an average price of $100 a barrel for the Indian crude basket while projecting inflation at 6.5 percent for the current quarter and 5.8 percent for the quarter ending March 2023.

Investing insights from our research team

Muthoot Finance: Can the stock correction be the reason to buy?

Grauer & Weil: Strong business traction, attractive valuation to support stock

Festive season, easing of supply woes bring cheer to automakers


What else are we reading?

RBI surveys don’t echo the central bank’s upbeat assessment of Indian economy

The Eastern Window: US puts India’s independent foreign policy to test

The loyalty factor in Congress elections and its history of chaos

A financial stability storm could upset RBI’s optimism

Global IT slowdown signals Indian tech’s fall from grace

Is a US recession the best thing that can happen to emerging economies? (republished from the FT)

Commodities | Derivatives trading suspension is futile. Its consequences are damaging

Women unravel authoritarian power in Iran and the US

Technical Picks: JSW Steel, Reliance, Jindal Steel and Power, USD-INR, Copper and Apollo Tyres (These are published every trading day before markets open and can be read on the app)

 

Ravi KrishnanMoneycontrol Pro
Ravi Krishnan is deputy executive editor at Moneycontrol