Oil prices have been a topic of concern recently, with various factors affecting their fluctuations. Concerns over China's demand for crude have intensified, leading to a decline in oil prices [182e26e4]. The decline in demand from China, as evidenced by the decline in exports, has put pressure on oil prices [182e26e4]. In addition, tax revenues from the UK's oil and gas sector are projected to reach £50 billion over the next five years, indicating the significance of the industry [182e26e4]. The global stock markets could experience a double-digit rally next year if the Federal Reserve cuts interest rates and the US economy avoids a recession [182e26e4]. However, the market is also concerned about the mounting demand concerns in the US and China, leading to a struggle in oil prices [ed1ce5f4]. The US is expected to see a decline in petroleum consumption this year [ed1ce5f4]. On the other hand, China's crude oil imports show robust growth, but fears of weakening global demand arise due to the contraction in total exports of goods and services [ed1ce5f4]. Saudi Arabia's Tadawul All Share Index remains steady, while the parallel market Nomu declines [ed1ce5f4]. Saudi exports are expected to increase, contributing to the global oil market [ed1ce5f4]. Amidst these developments, workers at Amazon are planning to go on strike, highlighting the ongoing disputes over pay in the company [182e26e4].
Oil prices rose 2% on Friday but are on track for a third week of decline due to signs of slowing demand [5d6fa260]. Weak Chinese economic data and reduced demand from Chinese refiners have raised concerns about faltering demand [5d6fa260]. The Eurozone inflation could increase in the coming months, but the European Central Bank is expected to keep interest rates unchanged for several quarters [5d6fa260]. In the US, Federal Reserve Chair Jerome Powell stated that interest rates are not high enough to tame inflation, while economists predict a 2% inflation rate by next summer [5d6fa260]. The UK's economy stagnated but avoided a recession in the July-to-September period [5d6fa260]. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will meet to discuss output cuts, with the possibility of Saudi Arabia extending its output cut into the first quarter of 2024 [5d6fa260]. Research firm RBC Capital Markets forecasts Brent crude to end this year and next year at around $85 per barrel [5d6fa260].
Fitch Ratings warns that a rise in oil prices could negatively impact global GDP growth in 2024 and 2025, with a projected decrease of 0.4% and 0.1% respectively [2f716965]. The agency highlights that higher oil prices would dampen GDP growth across most economies, with South Africa and Turkey being the most affected [2f716965]. The potential consequences also include higher-than-expected inflation rates in 2024, with Turkey, India, and Poland projected to experience the most significant increases [2f716965]. Fitch emphasizes that an oil price shock could lead to tighter financial conditions, decreased business and consumer confidence, and corrections in financial markets, with lingering impacts on the global economy [2f716965].
Falling oil prices could benefit India's economy, which is highly sensitive to crude oil prices [c87a42c9]. The demand for petroleum products in India is not price elastic, meaning that higher oil costs erode profits as households and businesses cannot adjust demand significantly [c87a42c9]. When oil prices rise, GDP growth is affected, and when they ease up, the economy recovers [c87a42c9]. In 2014-15, when global crude oil prices slumped suddenly, India's GDP growth shot up from 6.4% in 2013-14 to 8% in 2015-16 [c87a42c9]. The recent quarterly GDP data shows that falling oil prices boosted corporate profits and GDP growth in July-September [c87a42c9]. Manufacturing was the best performing sector during this period, with a growth rate of 13.9%, a nine-quarter high [c87a42c9]. Economists estimate that lower oil prices contributed 50 basis points to the 7.6% year-on-year GDP growth during the quarter [c87a42c9].
The decline in global oil prices has come as a major relief for the Indian economy, which imports over 85% of its crude oil requirement [b96c0796]. Volatile oil prices pose a downside risk to the economy as costlier imports trigger an increase in domestic inflation and weaken the rupee [b96c0796]. The price of the Indian basket of crude oil imports averaged $90.08 a barrel during October 2023 and $93.54 per barrel during September 2023 [b96c0796]. Prices of the benchmark Brent crude in the international market are now down to $77 a barrel [b96c0796]. The decline in crude prices would lead to an earlier reduction in interest rates to rev up economic activity [b96c0796].
Kotak Mahindra AMC's MD Nilesh Shah cites cheaper oil prices and strong GDP growth in India despite geopolitical tensions. Shah refers to double-digit oil prices in India, defying expectations due to geopolitical tensions and global events [71566f1d]. He also mentions US Fed hints on rate cuts and India's strong GDP growth rate [71566f1d]. Shah expresses bullish stance on the Indian economy, stating that India will remain the fastest-growing major economy in the world [71566f1d]. He attributes this growth to talent staying in India, infrastructure development, and capital [71566f1d]. India heavily relies on crude oil imports, affecting its inflation, current account deficit, import bill, currency depreciation, and fiscal deficit [71566f1d]. OPEC+ maintained its supply policy, leading to a rise in international crude oil prices [71566f1d].
According to StockEdge data, ONGC, Indraprastha Gas, Oil India Ltd., Petronet LNG, and Engineers India Ltd. are among the stocks that may benefit from rising crude oil prices [a81952ef]. ONGC's profitability is highly correlated to international crude prices due to its presence in ONGC Videsh Ltd. Indraprastha Gas may benefit from a shift towards compressed natural gas (CNG) as a cleaner and economical alternative fuel. Oil India Ltd. improves its earnings and margins when crude prices increase. Petronet LNG's sales of liquefied natural gas increase with the rise in crude prices. Engineers India Ltd. provides engineering consultancy and EPC services for the transportation of crude oil and petroleum products [a81952ef].
India is expected to register steady growth in crude oil consumption during 2024 despite high prices. Analysts and officials believe prices would need to rise significantly and for a sustained period of time to start really hurting demand. From January to April, India’s oil consumption increased by 4.8% compared to the same period last year [cc3ae7a8].