Udayavni Special

US crude oil prices dip below zero, but it won’t affect Indian prices

Team Udayavani, Apr 21, 2020, 2:20 PM IST

Crude oil prices have hit an all-time low and dropped to negative $37.63 per barrel after oil producers ran out of space to store the oversupply of crude left by the coronavirus crisis.

Demand for oil has dried up due to the lockdowns across the world and as a result, oil firms have resorted to renting tankers to store the surplus supply and that has forced the price of US oil to go low.

The price crash came as the US benchmark oil contract, known as West Texas Intermediate, headed towards its expiry date for May delivery.

But, the prices wont affect India as India’s entire crude basket represents oil from Oman, Dubai and Brent crude, not WTI.

Even if India brought WTI oil for free, it does not have enough capacity to store the oil as there is already existing stock in India.

Also, delivery of WTI oil have to be taken in Cushing in Oklahoma then transport from the middle of the USA to coast, and then ship it to India, given that even Brent price is also very low, India can easily import from them.

Due to excess supply of crude oil, prices in India are low and people are expecting those low crude prices to be reflected in retail prices. But if the government decides to raise the taxes to help in tax collection which is low due to the lockdown then we may not see any drop in the retail prices.

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