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The Silicon Review Asia

Crude Oil Prices Affected Due to the Pandemic

Crude Oil Prices Affected Due to the Pandemic

Major cities and trading centers globally are putting restrictions on travel and some have put themselves under lockdown and economic activity is expected to slow down at a very fast rate. Investors are very worried as the impact of the prolonged slowdown will be much greater than the benefit for India from lower crude oil prices. India imports more than 80 per cent of its oil requirements. The Brent crude price has dropped from $66 a barrel to $45 a barrel on 6th March due to the concerns on demand. However, the Organization of the Petroleum Exporting Countries and allies have failed to reach a consensus on supply cuts and a price war has been triggered to further drop to around $34 per barrel. 

The Lowered crude oil prices have been a good thing for India’s current account deficit and inflation. However, the impact of Coronavirus changes the landscape and nobody is sure how things will progress or deteriorate further from now.

“In the unfortunate event that the coronavirus situation worsens, the gains to India from the sharp crude price drop may well be offset by the demand destruction that would occur due to slowing economic activity," said Ritesh Jain, a global macro investor and market observer . “Plus, if crude oil prices sustain lower for a longer period of time, remittances from the Middle East will be hit, eventually resulting in unemployment of millions of Indians employed in the region," added Jain. These factors are ultimately poised to take a further toll on India’s economic growth.

 

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