New Delhi (Sputnik): Amid skyrocketing crude oil prices after the Houthi drone attacks on two major Saudi oil fields, India’s energy analyst expressed concern over its impact on the financial health and inflation on the world’s third-biggest oil importer.
Ravi Singh, a commodity market expert and vice president and head of research at Karvy said that the drone attacks on Saudi Aramco may inflate the country’s energy bill in the near future.
“Although the US has grown its shale production in recent times to become a net exporter of crude, it has a limited export capacity to fulfil the gap in case of acute shortage. China, Japan and Indiab which are the largest importers of Saudi Arabian oil, will be impacted the most,” Ravi Singh, Vice President of Karvy told Sputnik.
Major oil facilities in eastern Saudi Arabia were targeted in a drone attack on Saturday, prompting the kingdom to halt half of its oil production, sending the oil price soaring.
The analysis is in complete contrast with US President Donald Trump’s claim which he made after the attack to soothe the nervousness in the oil market.
“PLENTY OF OIL!… Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorised the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount sufficient to keep the markets well-supplied,” Trump tweeted on Sunday (15 September).
Brent Crude Oil prices surged by 10 percent on Monday morning to $66.25 per barrel following the attack. The US has blamed Iran’s support for the attack. Tehran however, has denied providing any such support and attacking the Saudi facility.
“This attack was carried on a country which is the largest exporter of crude oil in the world. This has resulted in the worst ever oil market disruption, even surpassing the loss of Kuwait and Iraqi oil supply in 1990 when Iraq invaded Kuwait. The attack has knocked out almost 5.70 million barrels a day of production from the facility, which is around 5 percent of total global output,” Ravi Singh explained, analysing the impact of the attack.
It is estimated that India’s current account deficit will widen by $1.5 billion if crude oil prices increase by a dollar. Additionally, the depreciation in rupee due to the surge in crude oil prices will make oil imports more expensive.
“Petrol and Diesel prices are expected to increase by 3-5 rupees per litre, which will cause an increase in inflation that may restrict the Reserve Bank of India from reducing interest rates,” Ravi Singh said, adding that this may impact the Indian economy, which is already facing a slowdown, adversely.
The current unexpected rise in crude oil prices may pose an even greater challenge to the Indian government, which adopted a range of policy initiatives in the last three weeks to revive the economy.