The Brent crude price crossed the $60 per barrel mark yesterday after over a year on the back of crude oil-producing countries maintaining production cuts and expectations of improvements in global demand as the Covid-19 vaccine is rolled out across the world.
The price of Brent Crude has risen by over 50 per cent since the end of October after prices had remained around $40 per barrel for five months. Major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic.
However oil-producing countries have continued to limit production despite an increase in prices with Saud Arabia cutting its own oil production by 1 million barrels per day to strengthen crude oil prices. Expectations of strong improvements in demand with the global rollout of the Covid-19 vaccine have also put upward pressure on crude oil prices according to experts.
“Crude trades near Jan 2020 high supported by Saudi’s voluntary production cuts, improvement in virus situation in some US states, vaccination progress and hopes of additional US stimulus,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
The rise in the price of Brent crude will lead to an increase in India’s import bill. India imports of 80 per cent of its crude oil requirements and the average price of Indian basket of crude oil has already risen to $54.8 barrel for January. The upward move in crude prices will also put upward pressure on petrol and diesel prices across the country which are already at all-time highs due to the recent rally in international crude prices as well as high central and state levies.
Petrol prices hit new record highs today across metros as oil marketing companies hiked the prices of both petrol and diesel by 35 paise per litre in the national capital taking petrol to a new high of Rs 87.3 per litre. Diesel prices in Mumbai set a new all-time high of Rs 84.36 per litre.