Crude Impact On Economy: Since the beginning of this year, there has been a continuous rise in the prices of crude. Talking about the year 2021, there has been an increase of about 38 percent in crude so far. At the same time, crude has become 42 percent costlier in the last 1 year. In the Middle East, there has been a big jump in crude amid tension and OPEC’s decision to continue the production cut. On March 8, Brent crude has crossed $ 71. At the same time, WTI crude is beyond $ 67. Most experts believe that crude will continue to rise in the mid term from the near term. If crude continues to grow at the moment, it may affect the Indian economy as well as the market.
Crude on top of 2 years
Iran-backed Saudi rebels have fired missiles at Saudi Arabian oil bases. Since then, there has been apprehension about the supply of crude and prices have risen sharply. On March 8, Brent crude crossed $ 71. This is the most expensive level since the onset of the corona epidemic. At the same time, WTI crude is also beyond $ 67, which is the most expensive after October 2018. Experts are now seeing a further rise in crude prices due to geo-political tension.
Crude will be expensive up to $ 75
Ajay Kedia, director of Kedia Commodity, says that with the improvement in fundamentals, there was a steady rise in crude this year. Now, due to the increase in geo-political tension and the production cut continues, its prices can get further support. Another relief package in the US, is also accelerating due to demand growth after the end of lockdown. He says that if production remains at this level, then Brent crude can be expensive up to $ 75 in March itself.
Anuj Gupta, Deputy Vice President, Commodity and Currency, Angel Broking, also believes that this boom in crude will continue. With the lockdown opening, every country is working to strengthen its economy. Due to this, the demand for crude is increasing. Demand from the aviation industry has also increased. The amount of crude used per day is now on the way to normal, which was reduced in lockdown.
Influence on growth, inflation will increase
The rise in the prices of crude means that the cost of purchasing countries will increase, which will deteriorate the balance sheet of that country. India is the major crude importing country. There is also a fear of rising inflation due to an increase in domestic expenditure. If the price of crude remains high then it will have an impact on the domestic as well as the global economy. However, it will also depend on the strength or weakness of the dollar, because the price of crude is fixed in dollars.
If crude remains expensive, the level of the global gross domestic product may decrease, while inflation will increase. According to RBI data, if crude increases by $ 10 per barrel, then the additional deficit of 1250 million dollars can increase. This is 43 bps of India’s GDP.
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Market impact
The impact of rising crude prices can also be seen on the market. In fact, many companies are directly or indirectly affected by the rise or weakness in crude. This may cause a sharp rise or fall in their shares. Aviation, automobile, logistics, paint, tires and
Companies using crude like shipping may reduce their profits. In such a situation, the performance of their shares can also be negative. Apart from this, oil marketing companies also have its disadvantages. However, experts also say that in the year 2014, crude has crossed $ 100. Therefore, nothing can be said about the impact of crude on the market right now, because the market fundamentals are strong.