International crude oil prices start hardening

NEW DELHI, January 27: With international crude prices now beginning to rise in the wake of the US threat to Iraq, some of the euphoria in t...

NEW DELHI, January 27: With international crude prices now beginning to rise in the wake of the US threat to Iraq, some of the euphoria in the Ministry of Petroleum is beginning to evaporate. While prices for crude had fallen to the lowest levels since April 1994 on January 22 — Dubai crude touched $12.6 per barrel — latest reports indicate that prices have gone up by around a dollar in the last couple of days.

Ministry officials monitoring the Gulf situation feel prices are certain to go up a little more in the days to come.

Every dollar increase increases the country’s import bill by around Rs 900 crore. Till today, it was expected that the fall in global prices would ensure that the oil pool account would be in a surplus for the year. Since the oil-economy-budget was based on an import price of $16 per barrel, Thursday’s prices represented a potential saving of over Rs 3,000 crore over the year. A lot will now depend on how the US-Iraq crisis works out. Oil experts say that the recent hike ispurely due to this reason. According to experts, there is an excess supply (over demand) of around 7 lakh barrels per day.

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Much of this is due to the UN decision to allow Iraq to produce oil worth $2 billion for buying food . Analysts also expect that the UN will soon increase its quotas by around half. Add to this the fact that OPEC nations have, as on several occasions in the past, breached their production quotas.

Experts believe that if Iraq is allowed to produce oil, and perhaps even increase its quota, Brent crude prices could settle at around $14 per barrel for the rest of the year. Anxious Petroleum Ministry officials are hoping for just that.