Crude oil becomes cheaper than water! Experts predict $25 per barrel levels in next one month

Crude oil prices hit its decade low of $28.6 per barrel on Monday, which means one litre of crude oil slipped to the tune of $0.18 per litre or around Rs 13.5 per litre. That means the crude oil price is lower than the packed mineral water that costs around Rs 15  to Rs 20 per litre. According to experts, the recent rise in the crude oil prices to the tune of $35 per barrel is temporary and it may further go down up to $25 per barrel in the global commodity market.

"Overall crude oil price in the next one month is negative. The recent rise in the global crude oil price is caused by the Saudi Arabia and Russia action to capitalise on the combined market share of near 27 per cent (15 per cent of Saudia Arabia and 12 per cent of Russia), which is around 9 per cent higher than the US global crude oil market share of 18 per cent," Amit Sajeja, Research Analyst at Motilal Oswal said.

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He added that OPEC plus Russia together make around 42 per cent of the global crude oil market share as OPEC covers around one-third of the global crude oil market. 

On crude oil price outlook for next one month; Amit Sajeja said, "The global crude oil demand has gone down that led to fall in global crude oil prices. That situation still persists as Coronavirus may continue to impact the global economy for at least next one more month. So, in the coming one month, I am expecting it to further tumble up to $25 per barrel levels."

Source: IANS

Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, "Global markets are in a complete rout. In an unprecedented development, global crude prices declined to a record 30 per cent on Monday before recovering marginally with the sudden emergence of the price war between the OPEC and the non-OPEC members of the oil-producing countries. First Russia didn't agree to a further output cut (for OPEC+) over & above the current output cut applicable till 31st March. Simultaneously, Saudi Arabia offers to reduce price and increase the production when the demand negating the impact of coronavirus is still uncertain, has taken markets by surprise. What it now implies is all OPEC & OPEC+ countries are free to explore  independent outputs till next OPEC meeting in June, implying that oil prices could go down even further."

"Our analysis shows that the nearly 30 per cent fall in crude oil prices could lower the petrol prices by Rs 12 per litre and diesel prices by Rs 10 per litre in India from their present prices. However, both Centre and States may not be willing to do so, as it may impact their overall revenue projection for FY20 given the fiscal constraints," she said. 

Dr Ghosh said that between FY18 and FY19, average crude oil prices increased from $56.43 per barrel to $69 per barrel, generated additional revenue of Rs 20,700 crore for States and Rs 11,800 crore for the Centre.