Sep 11, 2008|
Crude basket, rupee & more
Indian basket of crude falls...
The Indian basket of crude declined to US$ 99 per barrel, after a stay of nearly five months above the three-digit level. This comes as a major relief for the public sector oil marketing companies (OMCs) - Indian Oil, BPCL and HPCL - whose under recoveries from future sales is likley to come down to Rs 1.5 trillion from around Rs 2.45 trillion projected in June. At these levels, the OMCs are incurring a loss of around Rs 10 per litre on diesel and Rs 3 on petrol. However, they are making a profit (of around Re 1 per litre) on branded petrol for the first time since mid-last year.
In fact, as per a leading business daily, the petroleum ministry is evaluating a proposal to reduce the price of diesel if the crude prices fall below the US$ 85 per barrel mark. The ministry will have to consider the move in order to help reign in the record inflation levels in a pre-election year. It may be noted that the price of petrol and branded fuels are likely to be left untouched.
There is another dampener for the OMCs though - the steady decline of the rupee against the dollar. As India imports around 70% of its crude oil, the adverse exchange rate scenario negates the benefits of the falling crude prices to the OMCs.Also read - Fuel price hike: Impact on OMCs
...So does the rupee
Also read - Root lessons, rupee's slide & more...
Which fell below the Rs 45 to the dollar mark for the first time in nearly 2 years. It is widely expected that the slide is going to continue in the short to medium term. This expectation is based on the likely buying activity of the OMCs to meet their crude oil import requirements. Among the other concerns cited for the decline include a weak Indian stock market triggering more foreign fund outflows and arbitrage activity between the Indian market and rupee derivatives traded abroad.
China's real estate woes
China has joined the countries plagued by a real estate slump. Sellers are cutting prices to accommodate the falling numbers of buyers across China, especially in the Southeastern region where the price decline is to the tune of 10% to 40%. There is a lesser price decline in the other regions, but volumes have gone down by as much as 66%. Economists now fear a broader deceleration in China's growth rate, although it is still likely to be much higher than rest of the world. However, the real estate trouble in unlikely to translate into a banking crisis because most Chinese pay for homes in cash and Chinese banks require a 30% downpayment on mortgages.
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