OPEC's Decision to Increase Supply Could Provide India Some Relief: Care Ratings

The decision of Organization of Petroleum Exporting Countries (OPEC) and its allies to increase production by 0.6-mbpd to 1.0-mbpd will keep the price of Brent crude range bound between $70-$75/bbl in the coming months. With OPEC pumping in additional supply after 18 months of adherence to cutbacks and US increasing its supply, price of oil will be less pressured.

According to Care Ratings, with the world demand of crude oil rising and with the uncertainty in the global political scenario, the price of oil can rise despite of the increase in supply.

India, the ratings agency said, will get some relief as prices of oil will be lower than the highs of $78-80. “This will have a positive effect on market sentiment affecting our exchange rate and reduce the headline inflation,” it said. Prices of natural gas and LNG are also expected to fall as prices of crude oil eases. “Prices of natural gas and crude oil move in tandem. This is a positive for fertilizer, power, and petrochemical companies, which use natural gas as a feedstock,” the ratings agency added.