For the first time in its history, US oil prices dropped down to negative $37.63 per barrel on Monday. This means that the oil traders had to pay a buyer $30 in addition for an oil barrel. You would think that the oil prices would be down across the globe after this but that is not the case for almost two-third of the total nations, including India.
The difference lies in crude contracts that a nation adheres to. While the crude prices of Western Texas Intermediate were the ones that hit negative, Brent crude contract sat comfortably at $25.96 per barrel. India¡¯s oil imports follow the Brent pricing.
So the price at which India gets its crude oil is more or less the same as it has been since the global impact of Coronavirus pandemic. Though it has recorded a steep drop too, having been at $60 per barrel back in February.
The still low crude prices have their pros and cons. On the upside, it will help India cut down majorly on its import bills, at a time when majority of the country¡¯s financial resources are directed towards a single large cause. On the other hand, it can also impact the foreign investments due to a global economic depression as well as the tax revenue within the country.
That is also what might make the WTI price fall impact India too. While the petroleum prices in India will not be affected, foreign investments in India from countries affected by the WTI price fall is likely to dwindle.
The WTI drop was experienced despite a historic move by oil producers to cut down the global oil output in line with the reduced demand. A deal was brokered by US President Donald Trump between twenty-four countries, led by Saudi Arabia and Russia, also referred to as Opec+. They collectively reduced output by 9.7 million barrels per day.
This obviously failed to make any impact, with the results now visible to the world. A respite from the shortage in global demand is expected once the lockdowns caused by the Coronavirus pandemic lift off and mobility resumes.