Oil prices are on the rise, now exceeding $81 per barrel. This increase marks the highest level since August 2024. The surge is driven by concerns over new U.S. sanctions that could limit the flow of Russian oil. As a result, there is a rush to secure supplies from the Middle East and the U.S.
For fuel retailers, this uptrend raises fresh worries. Expectations of lower fuel prices are fading, especially as the costlier crude oil and a weakening Rupee squeeze profit margins. Recently, there were hopes for price cuts as reports indicated the profits for petrol and diesel had risen slightly, but those hopes may now be dashed.
State-run fuel retailers, which dominate the market, have seen their stock prices drop. IndianOil and Hindustan Petroleum faced declines of more than 6%, while Bharat Petroleum dropped over 4% on the stock exchange.
Looking ahead, analysts anticipate more fluctuations in oil prices. Notably, Goldman Sachs suggests that the recent U.S. sanctions could push Brent crude prices to $85 per barrel soon, with the potential to reach $90 if Russian shipments decline further.
Currently, India is the second-largest buyer of Russian crude oil, following China. If Russian supplies decrease, India may turn back to its traditional suppliers in the Middle East, Africa, and the Americas. Reports from ship-tracking agencies indicate that shipments from the Middle East are increasing, likely in response to lower prices for Russian oil.
However, this situation comes amid Russia’s own actions to cut exports as local demand rises for winter. Seasonal trends may continue through February, but it is likely Russia will attempt to boost exports regardless of the sanctions, leading to a shift in oil sourcing for India.
India relies on imports for about 85% of its oil needs. The real challenge lies in pricing, as costs for crude and shipping tankers may rise. This hike could affect the economy and limit the government’s budget for social programs. Higher oil prices will increase the import bill, impacting the current account deficit and putting pressure on the Rupee. As a result, both consumer prices and production costs for industries may rise, influencing the overall economic landscape.
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Source linkUS shipping sanctions,Russian barrels,oil prices,inflation,fuel retailers
