NEW DELHI: Giving a shot in the arm to Indian markets, international oil benchmark Brent crude fell below $90 a barrel on Tuesday for the first time since August as US President Donald Trump signalled that the West Asia war may be coming to a close.
Brent, the price gauge for around 80% of global crude, hit a low of $89.03 per barrel in morning trade in London.
Crude oil is a big burden on India’s imports bill, with the country sourcing 85% of its requirements from overseas. Falling prices could translate into lower transport costs and lower prices of goods and services, thus improving the purchasing power of households.
The fall in crude prices will likely bring cheers to equities, bonds and the rupee, and if the price sustains it may prompt RBI to rethink its pace in the battle against inflation.
On Monday, the Sensex added 107.25 points, or 0.13%, to close at 81,106.65, while the Nifty50 closed 58.25 points, or 0.23%, higher at 25,044.65. On Tuesday, the markets remained closed for Diwali-Balipratipada.
The rupee has weakened nearly 4% against the dollar this year, despite gaining some ground in recent weeks.
Analysts, however, aren’t willing to uncork the bubbly early. They said the fall in prices may not last long as global oil supplies remain tight and countries will need to replenish their strategic reserves.
“Global reserves, particularly in OECD countries and China, have come down considerably and have been drawn upon during the disruption,” said Prashant Vasisht, senior vice-President and co-group head, corporate sector, ICRA.Vasisht said countries would need to rebuild their strategic petroleum reserves.
Earlier, the West Asia conflict had triggered a massive price shock with Brent soaring to a peak of $118 in March.
PRICE CORRECTION
The fall in oil prices came after US President Donald Trump said he would hold off on fresh strikes against Iran. Hopes of a peace deal between Russia and Ukraine also supported the fall in prices
Indian basket average cost
The Indian crude basket averaged $100.01 a barrel in November, down 17% from $119.91 in October. It had averaged $116.09 in September, $90.19 in August and $82.04 in July. The basket was priced at $96.39 on November 6
