Rising oil can burn Rs 1-trillion hole in govt coffers in FY23: SBI report

 

Rising oil costs that have shot up more than 21% in the beyond one month to hit $105 a barrel as of late in the background of the continuous Russia - Ukraine international struggle mean something bad for the Indian government and can agitate its monetary math.

As indicated by a report by the financial wing of State Bank of India (SBI), rising raw petroleum costs can consume an opening as large as Rs 1 trillion in government's money chests in monetary 2022-23 (FY23). Regardless of the ascent in oil costs, the Indian government has kept a top on the retail selling costs of auto fills - petroleum and diesel - unaltered since November 2021 as a libertarian measure given the looming get together races across five states.

In view of the current worth added charge (VAT) design and taking Brent rough cost of $100 - $110 per barrel, SBI accepts diesel and petroleum costs ought to have been higher by Rs 9-14 each at this point.

"If the Government, be that as it may, cuts the extract obligation on oil based commodities and forestalls the costs of petroleum and diesel from rising, then, at that point, it will bring about an extract obligation loss of Rs 8,000 crore for a month. Assuming we accept that the decreased extract obligation go on in the following financial and expecting petroleum and diesel utilization develops around 8-10 percent in FY23, then, at that point, the income loss of the Government would associate with Rs 95,000 crore to Rs 1-trillion for FY23. In this specific situation, the FY23 spending plan numbers that are fixed safely would go about as a reasonable counter repeating support for such income misfortune," composed Dr. Soumya Kanti Ghosh, bunch boss monetary consultant State Bank of India in a new report.

Oil firms float finished fuel products on Arabian Sea as demand slumps

US Oil futures touched an unprecedented negative pricing on Monday over low demand and scarce storage. Closer home Indian refiners are facing a similar issue with their refined products, forcing companies like Bharat Petroleum Corporation (BPCL) to float some products in the Arabian Sea.
This is not the first time oil companies have used floating storage, however, officials point out using this option due to a large scale slump in demand and fully utilized tankages is a first.
"We are floating products like motor spirit and reformates," said a senior BPCL official. "These are in chartered ships, floating in the Arabian Sea. They will either will go to exports or be brought back for internal consumption depending on demand."
The official pegged the volumes to be lower at a few thousand tonnes of different products.
Since the nationwide lockdown was announced in March, India's fuel consumption has taken a major hit. Most industry executives said demand for petrol and diesel fell to a third of the normal, while demand for aviation turbine fuel (ATF) is now negligible, following the suspension of international and domestic flights.
The decline in demand has forced oil companies to run refineries at lower utilisation levels.
"Right now, the utilisation for refineries is at 50 to 60 per cent," the official quoted earlier in the story said.

Industry executives remain hopeful with that factory and agricultural work now resuming, demand for petrol and diesel will improve.

Goldman Sachs cuts Brent forecasts to $30 on price war, Coronavirus impact

Current Affairs
Goldman Sachs cut its second-and second from last quarter Brent value gauges to $30 per barrel, refering to the oil value war among Russia and Saudi Arabia and a huge breakdown in oil request due to the coronavirus that has killed more than 3,500 universally.
Oil fell by the most since 1991 on Monday after Saudi Arabia began a value war with Russia by cutting its selling costs and vowing to release its repressed stock onto a market reeling from falling interest on account of the infection episode.
"The forceful slice to Saudi's Official Selling Prices and Russia's hesitance to be driven into an arrangement on Friday point to a low likelihood of a prompt (OPEC+) understanding," Goldman said in a note dated March 8.
A three-year agreement between the Organization of the Petroleum Exporting Countries (OPEC) and Russia finished in bitterness on Friday after Moscow would not bolster further oil cuts and OPEC reacted by expelling all cutoff points on its own creation. "While we can't preclude an OPEC+ bargain in coming months, we additionally accept that this understanding was naturally imbalanced and its creation cuts financially unwarranted," the bank said.
Goldman's base case is presently for no such arrangement, it said.
Lower oil costs will begin making intense budgetary pressure and declining creation from shale just as other significant expense maker, the bank said.

There will be a unimportant reaction from U.S. shale makers in the subsequent quarter, yet yield will fall in the second from last quarter by 75,000 barrels for every day (bpd) and a further 250,000 bpd in the final quarter of 2020, the bank said....Read More

Oil prices near 2019 highs amid supply cuts by OPEC, US sanctions

International News

Oil prices on Friday hovered close to 2019 peaks reached the previous day, propped up by supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.

Brent crude oil futures were at $67.82 per barrel at 0122 GMT, down 4 cents from their last close but within a dollar of the $68.69 per barrel 2019-high marked the day before.

US West Texas Intermediate (WTI) futures were at $60 per barrel, virtually unchanged from their last settlement and not far off their 2019 peak of $60.39 touched on Thursday.

Prices have been propped up by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, often referred to as 'OPEC+'.

Despite a more than a quarter increase in crude prices this year, Canadian investment bank RBC Capital Markets said oil was "still below the fiscal breakeven level in a number of OPEC countries", meaning that many producers have an interest in further propping up the market.

"With the driver of the OPEC bus, Saudi Arabia, showing no signs of wavering in the face of renewed pressure from Washington, we believe that OPEC is likely to extend the deal for the duration of 2019 when they next assemble in Vienna in June," RBC said.

RBC said Russia was only a reluctant partner in the supply cuts, but would "ultimately opt to preserve the arrangement and retain a leadership role of a 21-nation group that accounts for around 45 per cent of global oil output".


 Beyond OPEC and Russia's supply policy, oil prices have also been boosted by US sanctions on OPEC-members Iran and Venezuela...Read More

Global oil prices skid on high US crude production, economic slowdown

Market News:
Oil prices fell on Monday after US energy firms added rigs for the first time this year in a sign that crude production there will rise further.

US spot crude oil futures were at $53.37 per barrel at 0027 GMT, down 32 cents, or 0.6 per cent, from their last settlement.

International Brent crude oil futures were at $61.37 a barrel, down 27 cents, or 0.4 per cent.Analysts said high US crude oil production, which hit a record 11.9 million barrels per day (bpd) late last year, was weighing on oil markets.

In a sign that output could rise further, US energy firms last week raised the number of rigs looking for new oil for the first time in 2019, adding 10 facilities, to 862, Baker Hughes energy services firm said in its weekly report on Friday.


 Beyond oil supply, a key question for this year will be demand-growth.Oil consumption has been increasing steadily, likely averaging above 100 million bpd for this first time in 2019, driven largely by a boom in China...Read More