Oil in free fall touches $40 a barrel

New Delhi, Aug 26 (IANS) Global crude in free fall touched the $40-a-barrel mark in trading the day before, having already dropped under $50 for the second time this year from levels of over $100 last year.

The basket of 12 crude oils of the Organisation of Petroleum Exporting Countries (OPEC) closed at $40.47 a barrel of nearly 160 litres on Tuesday, compared to $43 over the weekend, even as global crude oil prices plumetted to fresh six-year lows.

The Indian basket — comprising 73 percent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent — fell to its lowest of $42.59 on Tuesday, since December 2008 when the prices averaged $40.61 for the month, as per government data.

OPEC’S biggest member-economy Saudi Arabia is being considered key in the the slump in crude oil prices, for not cutting crude output in line with its long-term strategy of making production unviable for US explorers.

In July, the OPEC crude production increased by 101,000 barrels per day to average 31.51 million barrels per day, according to OPEC’s monthly oil market report last week.

Particularly since global powers signed the historic nuclear deal with Iran last month, traders have been worried that crude supply might exceed the demand.

Oil prices have been under pressure for several months due to concerns over oversupply, but the slump has deepened in recent weeks fuelled by fears of a sharp slowdown in the Chinese economy.

The fall in oil followed an 8.5 percent decline in the Shanghai Composite Index on Monday. China is the world’s second-largest consumer of oil after the US.

Analysts predictions of the price falling to as low as $20 have provoked fears about what the flip side of the situation could entail.

Saudi Arabia, which draws some 90 percent of its revenue from petroleum, is reportedly preparing to cut billions of dollars from its investment budget.

Unable to bear the burden anymore of long-standing subsidies, the United Arab Emirates government in July deregulated petrol and diesel prices, resulting in an increase by 24 percent in the price of petrol to $0.58 per litre.

According to an Indian energy expert, the current fiscal situation of Gulf nations like Oman and the UAE indicate they are beginning to feel the pinch of low oil prices.

These countries have concerns about unrest within their own populations, “simmering since the so-called Arab Spring”, says Amit Bhandari, a fellow at the Mumbai-based foreign policy think-tank Gateway House.

“These countries relied on higher social spending to quieten political unrest. This cannot continue indefinitely, but if let up, can lead to another set of problems for some of the states,” he said.

Leave a Reply

Please enter your comment!

The opinions, views, and thoughts expressed by the readers and those providing comments are theirs alone and do not reflect the opinions of www.mangalorean.com or any employee thereof. www.mangalorean.com is not responsible for the accuracy of any of the information supplied by the readers. Responsibility for the content of comments belongs to the commenter alone.  

We request the readers to refrain from posting defamatory, inflammatory comments and not indulge in personal attacks. However, it is obligatory on the part of www.mangalorean.com to provide the IP address and other details of senders of such comments to the concerned authorities upon their request.

Hence we request all our readers to help us to delete comments that do not follow these guidelines by informing us at  info@mangalorean.com. Lets work together to keep the comments clean and worthful, thereby make a difference in the community.

Please enter your name here