As a result of rising oil prices, what will be the economic impact?

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Oil prices flipped to gains on Thursday as investors expect top producers to stand pat on output policy, shrugging off earlier concerns about the resumption of Iran nuclear talks that could result in more oil exports from Tehran.

Brent futures and U.S. West Texas Intermediate crude pared losses of more than 1% as traders shifted focus to a meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, later on Thursday.

Moreover, Oil recently rallied to the highest since 2014 as an economic rebound from the pandemic combined with an energy crunch to drive up demand for crude. US President Joe Biden has led calls from major consumers for OPEC+ to increase output to cool elevated prices, but Saudi Arabia and others in the alliance have pushed back, citing risks from ongoing coronavirus outbreaks.

OPEC+ is set to ratify a monthly increase of 400,000 barrels a day, continuing the gradual revival of production halted during the pandemic, according to a Bloomberg survey. While that's been a consistent target for the alliance, some members - particularly Angola and Nigeria - haouggled to boost output.

On the other hand, in India the excise duty cut of Rs 5 on petrol and Rs 10 on diesel by the government to offset the impact of rising crude oil prices will lead to a revenue loss of Rs 45,000 crore, or 0.2 per cent of gross domestic product (GDP), in the remaining months of fiscal 2021-22 (FY22), suggests a note by Nomura. The research and broking house also lowered its consumer price inflation (CPI) projection as well given the development.

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“The tax cuts could cost the government Rs 1 trillion (0.45 per cent of GDP) on an annual basis in terms of lost revenues and around Rs 45,000 crore (0.2 per cent of GDP) for the remaining months in FY22,” the note said.

Another news is, Nationwide U.S. crude stockpiles rose by 3.29 million barrels last week, the Energy Information Administration reported Wednesday. That’s more than the median forecast in a Bloomberg survey. Inventories at Cushing fell for a fourth week to 26.4 million barrels. Shrinking supplies at the hub -- the delivery point for WTI futures -- have sent gauges of market health, known as timespreads, soaring to the most bullish levels in years.

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