Oil prices to stabilise at $110 a barrel
New Delhi   25-Jul-2008
Global crude prices are unlikely to drop below $100 a barrel in the near term but may stabilise around $110-115. This, notwithstanding a three per cent drop in the price this week to about $124 on Wednesday, the lowest since June 4. The $110-115 range will continue till at least the end of the year, Indian Oil Corporation chairman Sarthak Behuria (video on www.mydigitalfc.com) told Financial Chronicle. He was echoing the view widely held by global industry players that there is no justification for prices almost doubling from last year’s $70 as global supply and demand match around 86 million barrels a day. Crude rose from a seven-week low in early trading on Nymex on Thursday as traders used the dip to book futures contracts, a Bloomberg report said. Earlier, prices had fallen after a stronger dollar limited the appeal of commodities as a currency hedge and indications of a fall in demand in the US and Japan, Bloomberg said. “What we are seeing this morning is a modest and quite probably temporary recovery,” the report quoted Christopher Bellew, senior broker at Bache Commodities in London, as saying. Even if the prices stabilise at $110-115, it will still be a cause of concern to India since the economy has already taken a hit from an oversupply of oil bonds. However, the range would still be better than the price India is paying now. “It (prices stabilising at $110-115) will be good for the economy…The gov ernment worked out a good package (on June 5) of duty cuts, bonds and upstream sharing, and we will be able to manage,” said Behuria. The government allowed its oil companies — IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — to increase prices of petrol, diesel and LPG in June in the wake of a 50 per cent increase in international prices. It itself took a revenue hit of Rs 22,660 crore because of duty cuts. It also announced a commitment to issue oil bonds, the exact quantum of which is still to be worked out. Even after the package, as much as Rs 41,000 crore of the total estimated loss of Rs 2,45,305 crore for 2007-08 will remain uncovered.