Brent crude prices have fallen close to USD 36 per barrel, their lowest level since 2004. This comes in the backdrop of global oversupply as Washington lifts the ban on oil exports and US oil reserves reach an 85-year high.
Brent blend was trading at USD 36.04 a barrel, while US benchmark West Texas Intermediate was at USD 34.00.
On December 17, the Energy Information Administration (EIA) said that the current US oil inventories stood at 490.7 million barrels, while refineries operated at 92 percent of their capacity in the week ending December 11.
There was a double blow on December 18, when US President Barack Obama signed a bill to lift the US export ban. The ban was established due to the oil shortages faced by the US in the 1970s, as part of a bigger deal that included tax breaks for renewable-energy companies and refiners.
“I don’t doubt you’ll see some exports next year. We’re pretty excited about it, but we’ve also got to get the infrastructure in place,” ConocoPhillips CEO Ryan Lance said. American oil exports are “not going to happen immediately, but within a week or two, you’re going to see contracts be developed and a system come into place,” Representative Joe Barton, a Texas Republican and the House’s chief advocate for ending the export ban said.
“There is big hope that, in the first half or by the end of next year, oil prices would return to what they were,” Iraq’s Oil Minister Adel Abdul Mahdi told an Iraqi daily, not specifying a price level.
Blow for oil-exporting countries
The oil prices have been under pressure over concerns of global oversupply. The output of OPEC was the highest in over three years at 31.7 million barrels per day in November. Russia’s oil output has reached at post-Soviet record levels in November at 10.779 million barrels per day.
Many oil exporting countries will now have to rework their budgets for 2016. In its federal budget adopted for 2016, Russia was relying on USD 50 per barrel and 63.3 rubles per dollar. However, Russia’s President Vladimir Putin has now said that the budget needs to be adjusted.
Impact on India
The impact of cheap energy is generally positive for India. India imports over 70 per cent of its crude oil, a lot of gas and coal. The Current Account Deficit (CAD) has stayed at manageable levels because of low energy prices, and certain market reforms such as freeing up diesel prices has been possible.
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