NEW DELHI: Fuel prices in India seem set for a sharp decline in step with the $9-a-barrel slide in global oil prices, stoking speculation if the beginning of Narendra Modi’s second term as prime minister would see the kind of oil price slump witnessed at the start of his first stint.Crude oil tumbled below $61 a barrel on Monday from a tad above $70 on Thursday, May 28, on rising fears of a global economic slowdown fuelled by intensifying tension between the US and some of its key trading allies like China and Mexico.The Indian oil market, dominated by state-run marketers, has begun reflecting the global trend with petrol and diesel going down 56 paise and 93 paise a litre, respectively, since May 29.If the global trend sustains, price cuts in the domestic market will be much deeper. The Indian fuel marketers use an average of international fuel prices and currency variations for the trailing fortnight to determine daily local rates. This prevents immediate reflection of global market spikes in local prices, although they are directionally aligned.US President Donal Trump’s combative trade policies have spooked the commodity market, which fears that a trade war-induced slowdown would dent the demand for oil. A global slowdown, along with strong oil production in the US, would more than neutralise the supply pressures arising from sanctions on Iran and Venezuela and artificial production cut by OPEC and allies, investors believe.69641867 After the US decided to eliminate all waivers and force every country to bring down oil imports from Iran to zero from May 2, oil prices climbed to $75 per barrel on April 24 but gave up all gains quickly. The latest sell-off has come in response to Trump’s threat to impose new tariffs on Mexico. This, along with hard-to-resolve trade feud with China, is forcing investors to factor in a prolonged trade war and its effects on the global economy.Lower oil prices benefit India, which imports nearly 84% of its needs, but a global slowdown can hurt the local economy. A sharp decline in oil prices within months of Modi taking over as prime minister in 2014 had helped the government rein in inflation and cut its import and subsidy bills. Oil prices are going downhill yet again, coinciding with the beginning of his second term.The decline in global oil prices would depend on how the US resolves its trade ties with partners, how the global economy gets affected by trade feud, and how key oil producers like OPEC and allies react to the falling prices, industry executives said.
from Economic Times http://bit.ly/2Zbjhlb
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