India’s low inflation party might be over as the world braces for a crude price spike
- Low inflation in India is attributed to lower
crude oil priceswhich were range bound in the last six months.
- On Monday, the prices of Brent crude jumped a massive 12%, recording its biggest single-day leap in recent times.
- The last time this happened in 2008, India was thrown into a crisis mode
India has been enjoying low consumer price inflation which has been falling every month, to 3.15%. Apart from slowdown which has hit consumer sentiment, low inflation is also attributed to lower crude oil prices which has been trading under and around $60 a barrel for the last 6 months.
Now, this party is all but over. On Monday (September 16), the prices of Brent crude jumped a massive 12%, recording its biggest single-day leap in recent times. At 7.48 a.m., Brent was trading at $66.90 a barrel, says IANS.
This was triggered by a drone attack on the largest oil producing company, Saudi Aramco by the rebels who have taken over neighbouring country, Yemen. The drone attacks claimed by Yemen's Houthi rebels set alight two major oil facilities run by the state-owned company Aramco in Saudi Arabia on Saturday, the Kingdom's Interior Ministry said.
According to a note by Reliance Commodities, this could disrupt the global supply by more than 5%.
“Prices eased off their peaks after US President Donald Trump said he approved the release of oil from the U.S. Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined due to the attack on Saudi Arabia’s facilities,” the note said.
India’s oil crisis
However, India’s oil supply might not be heavily disrupted right away. As per a Reuters report, Aramco assured an Indian refiner that its supply won’t be hit.
That however is not stopping speculation that oil prices will see an unprecedented rise from now on. A few believe that it could hit $100 per barrel. The last time this happened in 2008, India was thrown into a crisis mode depleting the reserves of oil marketing companies, even as anger over government led to protests and bundhs.
Hedge funds and money managers increased their positions on US futures, as per Reliance note. It means that they are betting on the prices to rise in the near future. This would also impact Indian retail prices immensely and debunk the already flailing auto sales across the country.
With inputs from IANS
India's inflation has dropped so low it may trigger another rate cut