Indian basket of crude oil at 2-month high

The Indian basket of crude oil has increased around $2 since Wednesday to cross $50 a barrel for the first time in two months. This comes on the back of global benchmarks gaining the most since the beginning of August on reports of lower US stockpiles, coupled with indications that large producers, including Russia and Saudi Arabia, might hold talks to support the market.

The sentiment was helped by Tuesday's monthly demand-supply report by the US Energy Information Administration, which said global oil demand would grow in 2016 by the most in six years. Brent crude for November delivery rose 0.8 per cent to $53.47 a barrel on the London-based Inter Continental Exchange.

The Indian basket stood at $50.33 a barrel Wednesday, the highest level since August 3. However, between April 1 and October 7, the price has averaged at $56 a barrel, $14 less than the government's budgeted average price of $70 a barrel for the current financial year. According to K Ravichandran, senior vice-president at research and ratings agency ICRA, if the average price of $56 a barrel is sustained for the rest of the year, it will lead to Rs 91,000 crore savings in import and Rs 8,400 crore savings in the government's subsidy bill. "As per our estimates, every $1 decrease in the crude oil prices currently impacts the oil companies import bill by Rs 6,500 crore and their under-recoveries by Rs 900 crore. Also, the government's petroleum subsidy bill will be eased by Rs 600 crore," he said, adding, the benefit would be impacted also by the depreciation in rupee value.

Every Rs 1 increase in the exchange rate of the dollar increases the oil import bill by Rs 7,455 crore at current rates, according to Petroleum Planning and Analysis Cell, an arm of the petroleum ministry.

On Friday, crude oil futures rose after the US Federal Reserve suggested there was no hurry to raise interest rates. The gains added to Thursday's price surge with Brent crude, the benchmark for half the world's oil, set to achieve a near 12-per cent advance this week alone, the biggest weekly rise since early 2009.