Kolkata: Crude oil prices may remain elevated for a longer period due to supply tightness, uncertainty and new geopolitical developments, which may act as a hindrance to the softening of inflation in the country.
All eyes are now on tomorrow’s joint ministerial monitoring committee meeting (JMMC) of the Organization of the Petroleum Exporting Countries and allies led by Russia, which will review the market and members' implementation of output cut. However, industry watchers feel that there will be no significant decision at tomorrow’s meeting which will bring down the prices of crude oil.
Rising crude oil prices could impact inflation as well as the fiscal and current account deficits and could be highlighted as a challenge in the upcoming monetary policy review of the Reserve Bank of India that starts tomorrow and will be concluded by April 5.
Already, OPEC members led by Saudi Arabia and Russia in early March have agreed to extend voluntary output cuts of 2.2 million barrels per day (bpd) to the end of the second quarter to support the market.
In the geopolitical space, Ukraine has launched drone attacks on Russian refineries in recent weeks, reducing Russia's overall refinery capacity and cutting into its refinery output. Russia too, retaliated through a combined strike by air, sea and ground-based attacks on Ukraine’s energy infrastructure.
US has started to refill its Strategic Petroleum Reserves adding a total of 2.8MM bbl over the last few months. International Energy Agency forecasts a tighter market as oil demand is likely to rise by 1.3 mbpd, up 110k bpd from last month, while supply is set to increase by 1.7 mbpd. Upbeat Chinese industrial activity boosted the country's oil demand forecast