Rudra Investment | Crude Oil Relief

For the last few months, which had made trouble for the Crude Modi government, now the news of relief is coming from that side. The breakdown of crude in the international market has been hit. Crude is continuously falling for the fifth day and Brent Crude has been 10% cheaper since December 26. Experts say that while the demand has decreased over the world, crude production in the US is at its all-time high. In the next 2 to 3 months, crude may fall to $ 62. If there is a softening in crude, then the government will get an opportunity to improve the balance sheet, while there will be the relief even in terms of inflation.

Government expressed concern over crude

In the last week of December, Brent Crude reached a high of $ 3 a barrel at $ 3 a barrel. WTI crude was also at the record level with $ 66 a barrel. In the budget, finance minister Jaitley also expressed concern over the prices of crude and said it could increase inflation. The Economic Survey also anticipated that in the financial year 2019, crude prices could increase by 12 percent. In such a situation, crude was afraid to reach level 80 dollars. The government also increased the inflation rate for FY18 and FY19. Whereas, the growth estimates have already been reduced.

Bond Yields Fast Selling in Crude

Rudra Investment Commodity Expert and Research Vice President Anuj Gupta says that Bond Yield has seen a surge in many markets across the world. In the US, Bond Yield is at the top level of 4 years. In such a situation, its pressure is also falling on the crude market besides equity. People are investing in bonds by taking out the money from the Crude ETF, the mutual fund. In such a situation, profit booking in crude is increasing. This trends can be seen in crude for the next 15 to 20 days.

Demand lost in production all-time high in the US

Ajay Kedia, president of the Kedia Commodity, says that inventory is increasing in the US. At the same time, the effect of decreasing winter winters has decreased demand from around the world. Consumption in the US itself has decreased considerably. A few days ago, where there was a situation of overbought, now there is a surplus in the crude market.

In the US, in December, production was down to an average of 1.1 million barrels per day, now it is about 10.5 million, that is, 10 million barrels per day, which is at an all-time high. At the same time, the US government has made it clear that there will be no further reduction in crude production.

The dollar index is improving and it has crossed 90, thereby reducing crude support.

Prices can fall to $ 62/58

Ajay Kedia says that at present, the factors that support crude for the next 2 to 3 months are not visible. Summer is also coming when the crude consumption decreases. The Inventory incident in the US was a concern after the OPEC countries pursued the decision to cut production, but production there has been rapidly recovering. The dollar index is already strong. In the next two to three months, Brent Crude could come up to $ 62 and WTi crude is $ 58 a barrel. WTI Crude is currently in the range of $ 61.5. Anuj Gupta also believes that crude is likely to be doing business around this range in the next few months.

How Crude Can Become Advantage

The Economic Survey said that if crude oil prices increase by $ 10 a barrel, then that ratio decreases by 0.2 to 0.3 percent. At the same time, WPI inflation is up by 1.7 percent. Similarly, the current account deficit could increase to $ 1000 million. In such a situation, due to the fall in crude prices, this concern will be less for the government. Crude 71 is cheaper than the level of 71 and its 3 dollars is expected to be cheaper. In such a situation, relief of crude can be around $ 10 a barrel. In the last week of December, crude had increased from $ 44 to $ 71 a barrel compared to June 2017. That is, prices increased by $ 26 a barrel.

Chance to improve balance sheets

India imports 82% of its needs crude. With rising crude prices, India's import bill was rising in the same ratio. Thereby affecting the position of Current Account Deficit. At the same time, if crude is cheap, then the government will get an opportunity to improve the Balance Sheet once again.

Relief from inflation

Crude prices have also lowered crude prices in Indian baskets. This will reduce the pressure on faster companies. Oil companies can give the consumer the benefit of the reduction in crude prices. So petrol and diesel can be cheap. According to a report by the Foreign Brokerage House UBS, if crude prices increase by 10% then the CPI inflation may increase by 25 basis points. In such a situation, if the inflation is low before the 2019 general elections, it will be a big factor for the government.

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