Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Markets will remain closed on May 13, 2021 on account of Id-Ul-Fitr (Ramzan Id).

Will oil premium paid by India end?
Thu, 30 Jul Pre-Open

Presently, there is an oversupply of oil of 2m barrels per day. The Organization of the Petroleum Exporting Countries (OPEC) has remained adamant to cut the production of oil. The reason behind OPEC allowing prices to fall is attempting to fight off competition from US shale oil and maintaining its share in the US market. Keeping prices below US$ 100 per barrel has put pressure on higher cost US shale producers and could prevent further erosion of OPEC's position in America. The easing of sanctions on Iran's oil industry would put further pressure on the market which is already oversupplied. Further, there has been concern regarding economic health of China, one of the world's top energy consumers. If there are signs of slowdown in China in the coming months then the oversupply situation will get worse.

India almost imports 80% of its crude oil requirements. If everything else remains same, with the oversupply of crude oil, oil price is likely to come down. According to the officials at the Indian oil ministry, every dollar drop in oil prices will help reduce the government subsidy burden by US$ 1 bn. Lower crude prices would bring down imports and government subsidy bill. It would help to bring retail inflation below 5% and might provide room for the RBI for further rate cuts.

Premium from Asian buyers

Currently OPEC charges a premium on sale made to the Asian countries. For decades, India and other Asian countries have paid a price of up to US$ 5 per barrel more than the US or European refiners to OPEC. But in the past few years, the premium has greatly eroded with Asian demand, led by China and India, expanding and refiners asserting themselves. Some bit of it, however still remains. Mr. Pradhan, the minister of petroleum and natural gas addressing the 6th OPEC International Seminar said that there is a strong feeling for the Asian countries like India should receive an Asian dividend rather than paying Asian premium while making bulk purchase of crude.

Going forward

Earlier, crude flow was from West Asia to North America and the pricing also depended on the US market. Now, with the shale revolution, the flow has shifted to Asia. Since the flows have now changed, we are observing in the last few months that the prices we seem to be getting are better than the other markets. The dynamics of business have changed. It is no longer a supplier's market, but it is a buyer's market. We believe, the reduction of premium and oil prices by OPEC to Asian countries like India will help a lot by reducing the subsidy burden and the current account deficit as India imports 85% of its crude oil requirements from OPEC.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Will oil premium paid by India end?". Click here!

  

Views on News

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

More Views on News

Most Popular

The Next Smallcap Winners (Profit Hunter)

Apr 30, 2021

Price is the only due diligence one might require to buy this business.

Time to Buy Smallcaps? (Fast Profits Daily)

Apr 30, 2021

In this video, I'll show you why I favour smallcaps over the Nifty.

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS