Why the historic Iran nuclear deal could be good for India

In anticipation of the deal and its likely impact on crude prices the share prices of Indian public sector oil marketing companies witnessed a jump in its share prices.

Written by Sandeep Singh | New Delhi | Updated: July 14, 2015 6:31:28 pm
Iran Nuclear Deal, iran deal impact on India, india iran nuclear deal, historic mistake on nuclear deal, Israeli Prime Minister Benjamin Netanyahu, iran nuclear deal effect on india, nuclear deal with iran, nuclear deal india, nuclear deal 2015, top 5 points on nuclear deal with iran In anticipation of the deal and its likely impact on crude prices the share prices of Indian public sector oil marketing companies witnessed a jump in its share prices.

After 23 months of negotiations Iran finally entered into a historic nuclear deal with six world powers that paves the way for ending sanctions imposed by the US and Europe and also opens business prospects for the various countries including India in Iran. This is also expected to further lift the supply of crude oil in the global market that in turn will keep the oil prices lower.

Read Also: Iran, major powers reach historic nuclear deal

With six powerful countries sealing the deal with Iran to curb the Islamic Republic’s nuclear programme in return for ending sanctions, India is also making a renewed pitch for rights to develop 12.8 trillion cubic feet of gas reserves that ONGC Videsh had discovered in 2008.

Following the announcement, the prices of brent crude hit a day’s low of 56.43 per barrel on Tuesday from Monday’s price of 57.85 per barrel.

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India being a large importer of crude oil and imports around 80 per cent of its energy requirements, a dip in crude prices will not only positively impact the current account deficit (CAD) but also keep the inflation under control.

The CAD, which had already narrowed to 0.2 per cent of gross domestic product in the quarter ended March 2015 following soft oil prices. Experts feel that India can actually get into a position of current account surplus.
CAD refers to a situation where the country’s imports exceeds the value of exports of services and goods.

In anticipation of the deal and its likely impact on crude prices the share prices of Indian public sector oil marketing companies witnessed a jump in its share prices. While the shares of Indian Oil Corporation were up by 3.4 per cent on Tuesday, that of HPCL and BPCL rose by 3.3 per cent and 2 per cent respectively.

On the other hand the oil exploration companies such as ONGC and Cairn India witnessed a marginal decline in their share prices as a decline in prices impacts their revenue. Their share prices were down by 0.4 and 0.8 per cent respectively.

Also, the easing of sanctions would mean India can freely buy crude oil from Iran. Sanctions had meant that New Delhi could import no more than 9 million tonnes of oil this fiscal, the same volume it had shipped from Iran in 2013-15.

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