Explained: Why crude oil prices are falling and how it will impact fuel prices in India
The price of Brent crude has fallen under $63 per barrel from a high of $70 per barrel in early March on the back of growing fears about a fall in demand due to new travel restrictions to combat a resurgence in Covid-19 infections and increasing crude oil supply. We examine the recent trend in crude oil prices and its impact on India.
Why are crude oil prices falling now?
A recent resurgence in Covid-19 infections coupled with a decision by OPEC+ (a keep producers’ block) to increase crude oil production has contributed to a fall in crude oil prices. OPEC+ has announced a phased withdrawal of production cuts which would see total crude oil production by the group of countries rise by 1.1 million barrels per day by July.
Recent US data has also indicated that gasoline inventories are rising faster than the fall in crude oil inventories raising concerns of waning demand for petroleum products. US crude oil production capacity has recovered to about 11 million barrels per day after abnormally cold weather in February forced US crude oil output down to 9.7 million barrels per day.
