Consumers to benefit

Mamtha sharma in Bengaluru

The coronavirus pandemic has stalled factories and shut down business around the world, causing a historic drop in oil demand just as production was reaching new highs. The OPEC countries' agreement this April to cut crude oil production by ten per cent is unlikely to yield any major benefits to the parties concerned, thanks to the corona- virus pandemic.
The agreement is limited to a ten million barrels per day cut. This does not compare to the overall drop in global demand for oil which substantially exceeds the slash in production, following lockdowns across the world. Analysts note the drop in demand is too huge , near 30 per cent or about 30 million barrels per day. This is largely due to huge cuts in consumption by major players like China, Japan, India and South Korea. Goldman Sachs exclaimed the final OPEC deal was too little and too late . Besides, speculation is already rife whether all the parties concerned would adhere to the new arrangement. The initial attempt by Saudi Arabia to bring Russia to the table had failed earlier as the latter had its own reservations. Analysts argue Russia was happier even if it got $ 50 dollars a barrel for its crude . To be economically viable , the West Asian producer wanted a price of $80. While Saudi Arabia had huge debts to pay off, Russia was better placed as it had judiciously purchased enough gold to balance its requirements for funds , in the event of an emergency. Besides, it was not troubled by any major debts . Importantly, Russia had the advantage in that oil revenues account for 37 per cent of its budget .In comparison, Saudi Arabia's dependency on oil exceeds 65 per cent. Of course, this was before Russia finally agreed to come to the table to sign the production cut arrangement. That the plunging crude prices following availability of huge supplies, are creating problems for the Gulf oil producers, is also evidenced from some recent development. Saudi Arabia is learnt to have raised $ 7 billion last month in bond sale with Qatar following suit with $ 10 billion. The emirates of Abu Dhabi said recently that it sold bonds worth $ 7 billion . It is learnt that Kuwait is

Analysts note the drop in demand is too huge , near 30 per cent or about 30 million barrels per day. This is largely due to huge cuts in consumption by major players like China, Japan, India and South Korea.

In India's case, the current price, hovering between $ 20 and $ 30 a barrel, comes as the much needed bonus during the difficult times that it is witnessing. These could prove to be the much required silver lining .

seeking to borrow $ 65 billion over the next ten years. According to the IMF, the Gulf Cooperation Council economies are likely to shrink 2.7 per cent this year consequent to the global slump in demand .

Significantly, the US , a non - OPEC producer like Russia, accounts for a production of nearly 12 million barrels a day. Russia and Saudi Arabia come close at about 11 and ten millions respectively. The balance is accounted for by other producers like Mexico and a section of the west As/ian countries besides Indonesia.
The situation remains slippery for the oil producers . The cuts come into effect from May. Already the market is flooded with unsold quantities. Not surprising, India has been pitching for a stable pricing regime and market.
In India's case, the current price, hovering between $ 20 and $ 30 a barrel, comes as the much needed bonus during the difficult times that it is witnessing. These could prove to be the much required silver lining . In fact, every drop of $ 1 dollar in crude prices leads to the country saving about $ 1.5 billion in foreign exchange. For the record, India's foreign exchange reserves at last count stood at $ 470 billion. The falling energy prices

The falling energy prices would help India narrow its trade and current account deficit, considering its over dependence on imports . If the prices continue to hover around $ 30 or so for most part of this year, India's oil bill could be substantially low in the coming months.

would help India narrow its trade and current account deficit, considering its over dependence on imports . If the prices continue to hover around $ 30 or so for most part of this year, India's oil bill could be substantially low in the coming months.
Lower crude prices would have a bearing on India's inflation and fiscal deficit. Low inflation would help revive some spirits as would the expected fall in domestic oil prices .
This could leave some money in the hands of the consumer though it would be premature to judge what his spend would be on ,post the eventual lockdown and the sea-change in priorities. Likewise, lower petroleum and related products' prices could come as a boon to the agriculture sector with the fertiliser prices coming down .
This apart , the downtrend in crude prices would also help India boost its strategic reserves.
It is not surprising to see that other consumers are also showing equal interest in boosting their strategic reserve ; even seeking to hire floating tankers for storage ,to meet their emergency needs for the future; something India may also be looking at.



		EDITOR'S MAIL EDITOR'S COMMENT PANDEMIC EFFECTS FRANKLY SPEAKING NEW PANDEMIC REALPOLITIK PANDEMIC EFFECTS NEW PANDEMIC NEW PANDEMIC SECURITY SCENE KERALA MADHYA PRADESH J&K SCENE PAKISTAN WATCH SIGNS OF THE TIMES WATER CONSERVATION OPEC CHANDIGARH DIARY HITS & MISSES PANDEMIC EMERGENCY MEDIA SPACE ENGINEERING OUR CONSTITUTION ESSENCE OF THE GITA ART OF LIVING Issue:May' 2020 Subscribe Now	OPEC Consumers to benefit Mamtha sharma in Bengaluru The coronavirus pandemic has stalled factories and shut down business around the world, causing a historic drop in oil demand just as production was reaching new highs. The OPEC countries' agreement this April to cut crude oil production by ten per cent is unlikely to yield any major benefits to the parties concerned, thanks to the corona- virus pandemic. The agreement is limited to a ten million barrels per day cut. This does not compare to the overall drop in global demand for oil which substantially exceeds the slash in production, following lockdowns across the world. Analysts note the drop in demand is too huge , near 30 per cent or about 30 million barrels per day. This is largely due to huge cuts in consumption by major players like China, Japan, India and South Korea. Goldman Sachs exclaimed the final OPEC deal was too little and too late . Besides, speculation is already rife whether all the parties concerned would adhere to the new arrangement. The initial attempt by Saudi Arabia to bring Russia to the table had failed earlier as the latter had its own reservations. Analysts argue Russia was happier even if it got $ 50 dollars a barrel for its crude . To be economically viable , the West Asian producer wanted a price of $80. While Saudi Arabia had huge debts to pay off, Russia was better placed as it had judiciously purchased enough gold to balance its requirements for funds , in the event of an emergency. Besides, it was not troubled by any major debts . Importantly, Russia had the advantage in that oil revenues account for 37 per cent of its budget .In comparison, Saudi Arabia's dependency on oil exceeds 65 per cent. Of course, this was before Russia finally agreed to come to the table to sign the production cut arrangement. That the plunging crude prices following availability of huge supplies, are creating problems for the Gulf oil producers, is also evidenced from some recent development. Saudi Arabia is learnt to have raised $ 7 billion last month in bond sale with Qatar following suit with $ 10 billion. The emirates of Abu Dhabi said recently that it sold bonds worth $ 7 billion . It is learnt that Kuwait is Analysts note the drop in demand is too huge , near 30 per cent or about 30 million barrels per day. This is largely due to huge cuts in consumption by major players like China, Japan, India and South Korea. In India's case, the current price, hovering between $ 20 and $ 30 a barrel, comes as the much needed bonus during the difficult times that it is witnessing. These could prove to be the much required silver lining . seeking to borrow $ 65 billion over the next ten years. According to the IMF, the Gulf Cooperation Council economies are likely to shrink 2.7 per cent this year consequent to the global slump in demand . Significantly, the US , a non - OPEC producer like Russia, accounts for a production of nearly 12 million barrels a day. Russia and Saudi Arabia come close at about 11 and ten millions respectively. The balance is accounted for by other producers like Mexico and a section of the west As/ian countries besides Indonesia. The situation remains slippery for the oil producers . The cuts come into effect from May. Already the market is flooded with unsold quantities. Not surprising, India has been pitching for a stable pricing regime and market. In India's case, the current price, hovering between $ 20 and $ 30 a barrel, comes as the much needed bonus during the difficult times that it is witnessing. These could prove to be the much required silver lining . In fact, every drop of $ 1 dollar in crude prices leads to the country saving about $ 1.5 billion in foreign exchange. For the record, India's foreign exchange reserves at last count stood at $ 470 billion. The falling energy prices The falling energy prices would help India narrow its trade and current account deficit, considering its over dependence on imports . If the prices continue to hover around $ 30 or so for most part of this year, India's oil bill could be substantially low in the coming months. would help India narrow its trade and current account deficit, considering its over dependence on imports . If the prices continue to hover around $ 30 or so for most part of this year, India's oil bill could be substantially low in the coming months. Lower crude prices would have a bearing on India's inflation and fiscal deficit. Low inflation would help revive some spirits as would the expected fall in domestic oil prices . This could leave some money in the hands of the consumer though it would be premature to judge what his spend would be on ,post the eventual lockdown and the sea-change in priorities. Likewise, lower petroleum and related products' prices could come as a boon to the agriculture sector with the fertiliser prices coming down . This apart , the downtrend in crude prices would also help India boost its strategic reserves. It is not surprising to see that other consumers are also showing equal interest in boosting their strategic reserve ; even seeking to hire floating tankers for storage ,to meet their emergency needs for the future; something India may also be looking at.