Global crude prices traded on a subdued note on Wednesday morning after rising around 8% over the previous three sessions.
Around 7:50 AM, the July contract of Brent on the Intercontinental Exchange was at $107.08 per barrel, down 0.64% from its previous close. The June contract of West Texas Intermediate fell 0.64% to $101.53 a barrel.
In the previous session alone, prices had risen about 3%. Investors are now awaiting clarity on the prospects of long-term peace in West Asia and an end to the war.
On Tuesday, US President Donald Trump said he does not need China’s assistance in ending the war on Iran.
Speaking to reporters before departing for China for a state visit with President Xi Jinping, Trump said: “I don’t think we need any help with Iran”. He also said that the US will win the war “one way or the other”.
Strait chokehold
The —a channel for 20% of the world’s oil and gas trade—has been shut for nearly 75 days, keeping the oil market on the boil.
Global energy supplies have tightened sharply, and India has been severely impacted by the crisis.
As of 11 May, the Indian crude oil basket stood at $104 per barrel. It represents a derived basket comprising Sweet grade (Brent Dated) and Sour grade (Oman & Dubai average) crude imported by Indian refineries.
Prime Minister Narendra Modi has already appealed to citizens twice this week to rationalize petrol and diesel use, shift to public transport and to save foreign exchange spent on oil imports.
Mounting losses
Reiterating that India’s state-run (OMCs) are incurring significant losses by selling petrol, diesel and gaseous fuels below cost amid the surge in global crude prices, Union minister for petroleum and natural gas Hardeep Singh Puri on Wednesday said the government may eventually have to decide how long the situation can continue.
Addressing the annual general meeting of industry body CII, Puri said OMCs were losing ₹1,000 crore a day due to stagnant pump prices despite a sharp rise in international crude oil and natural gas prices.
To a question on how long OMCs can endure the losses, he said: “How long will the oil companies be able to take it? Frankly that’s something that worries me. I mean there have been times when the oil companies have done really well.”
At the current rate, the April–June quarter’s losses may wipe out fuel retailers’ entire profit after tax from last year, he added. “These (OMCs) are good corporate citizens. They are taking a loss in order for the consumer to be insulated.”
“How long can this happen? At some stage, the government will have to a view on that,” he said.