In News -Recently, the price of Brent crude crossed the $60 per barrel mark.
- The price of Brent Crude has risen by over 50 percent since the end of October after prices had remained around $40 per barrel for five months.
Reasons for the rise in the price of crude oil
- Major oil-producing countries had cut oil production last year amid a sharp fall in demand due to the Covid-19 pandemic.
- Saud Arabia cut its own oil production by 1 million barrels per day to strengthen crude oil prices.
- Expectations of strong improvements in demand with the global rollout of the Covid-19 vaccine have also put upward pressure on crude oil prices.
Impacts on India –
- The rise in the price of Brent crude will lead to an increase in India’s import bill.
- India imports 80 percent of its crude oil requirements and the average price of the Indian basket of crude oil has already risen to $54.8 barrel for January.
- It will also put upward pressure on petrol and diesel prices across the country which is already at all-time highs due to the recent increase in international crude prices as well as high central and state levies.
What is Brent crude?
- Brent is actually a combination of crude oil from 15 different oil fields in the Brent and the North Sea areas.
- It is a reasonably “light” and sweet crude oil with API gravity of 38.3 degrees and about 0.37 percent of sulphur.
- It is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives.
- The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well.
- Brent Crude is produced near the sea, so transportation costs are significantly lower.
- In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous.
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Crude Oil
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