homeeconomy NewsFiscal strain looms as global crude prices touch $80 per barrel

Fiscal strain looms as global crude prices touch $80 per barrel

Fiscal strain looms as global crude prices touch $80 per barrel
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By Sanjeeban Sarkar  May 22, 2018 1:16:14 PM IST (Updated)

Oil prices have risen nearly 20 percent since January, raising concerns about the effect this would have on import-reliant countries, especially in Asia.

Oil prices breached the $80 per barrel mark on Thursday for the first time since November 2014, as a steep fall in oil supply from Venezuala and concerns over fresh US sanctions on Iran boosted fears of a supply shortage.

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While rising US output and a strong dollar held the prices back for the session, worries over falling global inventories remain.
Global crude and fuel oil inventories have fallen on the back of robust demand and production cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
"Because of rising prices, we lowered our estimate for 2018 global oil demand growth by 40,000 barrels a day to 1.4 million barrels a day and we increased our expectation for US oil production growth this year by 120,000 barrels a day," said the International Energy Agency in a statement.
Rising oil prices are especially worrying for oil importers such as India, which imported a record 4.37 million barrels per day in 2017, up about 1.8% from the previous year.
CLSA managing director, Christopher Wood, in his weekly note GREED & fear, said rising oil prices remained the primary risk to investors in Indian equities from the perspective of US dollar returns.
A Prasanna, an economist at ICICI Securities, said inflation in the country could rise to between 5.3-5.4%, up from March CPI numbers of 4.9%, if the government does not intervene in terms of duties, or if the oil companies pass costs on to customers.
Oil prices have risen nearly 20 percent since January, raising concerns about the effect this would have on import-reliant countries, especially in Asia, as surging costs could push inflation higher, hurting both consumers and companies.
"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality," the IEA said.
"In Venezuela, the pace of decline of oil production is accelerating and by the end of this year output could have fallen by several hundred thousand barrels a day," said the energy body said.
Fears of fresh sanctions on Iran are also boosting supply concerns, as neither Venezuela, nor Mexico can raise production significantly to match global demand. Sanctions on Iran in 2012 had  led to a fall in export of about 1.2 million barrels a day.
India’s imports from Iran in 2017 totalled about 471,000 bpd, marginally lower than a year ago.
(with input from Reuters)
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