Oil rises as global outlook offsets worries over India

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Context

  • Oil prices rose as expectations of rising fuel demand offset concerns about the impact of a surge in India’s coronavirus cases and higher U.S. crude inventories.
  •  Brent crude futures were up 67 cents, or 1.01%, to $67.09 a barrel at 1352 GMT, after rising 1.2% on April 28.

Accommodated as global consumption

  • An OPEC+ decision to stick to plans for a phased easing of oil production restrictions from May to July underscored the group’s confidence in a recovery in global demand.
  •  The market is supported by the general belief that the COVID endgame is in sight. The market clearly thinks that these extra barrels will be easily accommodated as global consumption picks up in the second half of 2021.
  •  t expected “the biggest jump in oil demand ever, a 5.2 million barrels per day rise over the next six months” as vaccination campaigns accelerate in Europe and demand for travel climbs.

BIASA BASICS

Oil Pricing- Details and importance 

  •  Generally, the Organization of the Petroleum Exporting Countries (OPEC) used to work as a cartel and fix prices in a favourable band.
  •  OPEC could bring down prices by increasing oil production and raise prices by cutting production.
  •  The global oil pricing mainly depends upon the partnership between the global oil exporters instead of a well-functioning competition.
  •  Cutting oil production or completely shutting down an oil well is a difficult decision, because restarting it is immensely costly and complicated.
  •  Moreover, if a country cuts production, it risks losing market share if other countries do not follow the suit.
  •  Recently, OPEC has been working with Russia, as OPEC+ to fix the global prices and supply.
  •  In 2016, OPEC allied with other top non-OPEC oil-exporting nations to form an even more powerful entity named OPEC+ or OPEC Plus.

To know more in detailed about brent crude oil watch this video on our youtube channel 

Difference between Brent and WTI

  • Brent crude oil originates from oil fields in the North Sea between the Shetland Islands and Norway.
  •  West Texas Intermediate (WTI) is sourced from US oil fields, primarily in Texas, Louisiana, and North Dakota.
  • Light and Sweet:
  •  Both oils are relatively light, but Brent has a slightly higher API gravity, making WTI the lighter of the two.
  •  American Petroleum Institute (API) gravity is an indicator of the density of crude oil or refined products.
  •  WTI with a lower sulphur content (0.24%) than Brent (0.37%), is considered "sweeter".
  • Benchmark Prices:
  • ○ Brent crude price is the international benchmark price used by the OPEC while WTI crude price is a benchmark for US oil prices.
  • ○ Since India imports primarily from OPEC countries, Brent is the benchmark for oil prices in India.

SOURCE: THE HINDU 

 

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