, ETMarkets.com|
Jun 06, 2017, 07.41 PM IST
A UBS report suggests any notable rise in oil prices, say by $10 a barrel, may push India’s import bill higher, which could dent current account deficit (CAD) by $11 billion.
NEW DELHI: Will the decision of Saudi Arabia and six other Gulf nations to severe ties with Qatar impact the domestic economy or Dalal Street?
For one, India buys oil and gas from both Saudi Arabia and Qatar. Saudi is the world’s largest oil exporter, while Qatar is the largest exporter of liquefied natural gas and condensate.
However, analysts said the rift is unlikely to have any bearing on India. In fact, it could work in its favour, if Opec efforts to tighten crude output go off track.
“I do not think it should have any impact on India,” said Alastair Newton, Alavan Business Advisory.
On Tuesday, crude oil prices dropped in global market for a third day amid concerns that the tension would undermine an Opec-led push to tighten the market amid persistent gains in US production, which are already dragging the benchmark crude prices.
Saudi Arabia, the United Arab Emirates, Egypt and Bahrain have closed transport links with Qatar, as they believe the country was supporting extremism and undermining regional stability.
India has maintained that it is an internal matter of the Gulf Cooperation Council (GCC), with External Affairs Minister Sushma Swaraj saying that India was only concerned about its nationals in Qatar.
Newton of Alavan Business Advisory noted that India has benefitted significantly from the drop in crude prices relative to three years ago and this has even reflected in government budget as it has enabled the Modi administration to reduce fuel subsidies.
“India can remain confident that it is going to continue to derive benefit from low energy prices relative to three years ago, unless there is some sort of major supplyside shock. This development is not the one by any means,” Newton said.
He expects that the West Asian countries to continue producing oil consistent with their November 2016 agreement at Opec.
“We do remain in a surplus output capacity mode at this point of time, thanks of course to the ongoing second boom in US oil production,” Newton said.
Manpreet Gill of Standard Chartered Bank last week said crude oil prices may creep higher, but gradually.
“Moving above even $60 a barrel is always tough in our view because that is the where there is always going to be willing supply from US shale oil producers. It is really going to be a tug of war between those, because we clearly think efforts on the Opec-plus Russia to restrain supply growth is clearly very strong, but we are seeing signs that a little more supply is coming through than we originally expected. Prices can still creep a little bit higher, but we are not looking at a big rebound,” Gill said.
A UBS report suggests any notable rise in oil prices, say by $10 a barrel, may push India’s import bill higher, which could dent current account deficit (CAD) by $11 billion.
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