Oil crosses $105 a barrel as hostilities escalate in West Asia | Today’s news
New Delhi: Oil prices continued to rise on Thursday, with Brent crude up more than 4% to surpass $105 a barrel and close to a four-month high, driven by the escalating conflict in West Asia and the Houthi militia’s advance towards the Bab-al-Mandeb Strait.
Yemen’s Houthi militia has captured the critical Red Sea city of Mocha and expanded its control over the strategic Bab-al-Mandeb Strait, a vital global trade corridor, Al Jazeera reports. Houthi control of the canal is expected to disrupt Saudi oil exports through the route, dealing another blow to global oil supplies.
Around 21:00 IST, November Brent contract was trading at $105.82 per barrel on the Intercontinental Exchange, up 4.55% from the previous close. Meanwhile, the October West Texas Intermediate contract on the NYMEX climbed 4.42% to $100.30 a barrel. Brent broke above $100 a barrel for the first time in six weeks on Wednesday.
Escalating hostilities in West Asia raise the risk of tight supplies, which threaten to swell India’s oil import bill while adding to inflationary and fiscal pressures.
Growing pressure on India’s oil bill
India, which imports about 90% of its oil, remains particularly exposed to sustained price increases. Bank of Baroda estimates show that a sustained $1 rise in oil prices can increase the country’s annual import bill by about ₹18,000 million crowns. India’s oil import bill of about $120 billion a year is about 17-25% of its total merchandise imports.
This stress had been building even before the recent increase. India’s April-July crude oil import bill reached $63.37 billion, up 56% year-on-year, and already accounts for more than half of the previous financial year’s total oil import expenditure.
The rise comes as global financial markets grapple with the risk of rising energy costs weighing on broader economic growth. Ratings agency ICRA noted that based on the average price of India’s crude oil basket so far in September, state-owned oil marketing companies are making negative marketing margins of ₹5 per liter for petrol and ₹23 per liter of diesel, while the domestic under-recovery of LPG has almost touched ₹200 per cylinder.
In a major development that could affect future energy markets, US President Donald Trump said on Wednesday that he expected the war with Iran to last until November’s midterm elections, adding that oil prices were unlikely to fall until then.
“I think the war will end immediately after the election because they can’t take it anymore,” Trump said, referring to Iran’s leadership.
