Higher oil prices pose risks to external stability, currency movement says report as Crude oil breaches USD 110/bl mark

Bank of Baroda in its research report stated that surge in oil prices because of the crisis pose considerable risks to the Indian economy.

Brent futures rose $7.00, or 7.1 per cent, to settle at $104.97 a barrel, their highest close since August 2014: PTI

State-owned oil marketing companies’ shares gained up to 10 per cent during Wednesday’s trade on the BSE intraday, as crude oil surpassed to highest levels since 2014 amid Russia-Ukraine crisis. Oil India shares zoomed over 9 per cent, followed by Oil Natural Gas Corporation (ONGC) up 5 per cent.

Bank of Baroda in its research report stated that surge in oil prices because of the crisis pose considerable risks to the Indian economy. Higher oil prices pose risks to external stability and currency movement, will also impact inflation and fiscal situation.

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It added, “Apart from the direct impact of higher prices on inflation, pass-through effect on other sectors may not be transitory as expected by the Reserve Bank of India, and the government may have to calibrate its fiscal stance given the rising yields.”

According to Reuters report, “Oil prices surged over 7 per cent on Tuesday to their highest since 2014, as a global agreement to release crude reserves failed to calm fears about supply disruptions from Russia's invasion of Ukraine.”

Brent futures rose $7.00, or 7.1 per cent, to settle at $104.97 a barrel, their highest close since August 2014, as a global agreement to release crude reserves also failed to calm fears about supply disruptions from Russia's invasion of Ukraine, the Reuters reported.

In the early hours of Wednesday’s session, Brent crude has jumped over $110 per barrel and WTI Crude around $110 per barrel, as per the data available on the investing.com.

Crude oil prices extended gains as the conflict in Ukraine escalated fears of lower supply from the top oil exporter. The increase in crude oil also benefits exploration and drilling companies, as per Zee Business research report.

The order book of drilling companies has increased, these companies are – United Drilling, Asian Energy Companies manufacturing drilling pipes, while other companies that operate in the oil and gas sector such as EIL, as has an advantage, the research report said.

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