The slump in China’s economic growth to the lowest in nearly three decades may bring some crude relief to the Indian economy, with the slowing global demand pushing crude oil prices lower. Subdued crude oil prices could help Indian government contain fiscal deficit and also the trade deficit, as the country imports 80 per cent of its oil requirements, analysts said. China’s gross domestic product or GDP rose at 6.2% in Apr-Jun quarter, the slowest since 1992 and down from 6.4% in the last quarter, according to the government data released on Monday. China will continue to face “downward pressure” in the second half of this year, the National Bureau of Statistics, China said in a statement.
Earlier this month, Finance Minister Nirmala Sitharaman announced additional special excise duty of Re 1 per litre and road and infrastructure cess of Re 1 per litre on both petrol and diesel, in view of softening crude oil prices to shore up government finances and keep the fiscal deficit target within the range. A strong rupee will help in bringing India’s crude oil purchase price further down from the current levels, which will have an indirect impact on the domestic fuel prices, helping customers feel the lesser pinch from an increase in cess on petrol and diesel, Ajay Kedia, Director at Kedia Commodity, told Financial Express Online.
After last week’s rally in crude oil prices by 4.7 per cent, overall sentiment for crude is weak amid demand concerns following China’s weak economic data. After weakening of storm in the Gulf of Mexico, WTI oil retreated from $60 per barrel. However, the forecast of drawdown in weekly crude oil inventories by Bloomberg has supported a case for stable oil prices. This is the fifth straight week of drawdown, Jigar Trivedi, Fundamental Analyst – Commodities, Anand Rathi Shares & Stock Brokers, told Financial Express Online.
Last week crude oil prices settled higher with the threat of a hurricane, followed by a mild threat to distribution in the Middle East and successive weekly fall in US inventories. This week, prices may soften as crude oil demand concerns outweigh positive factory output and retail sales data out of China, Ajay Kedia said. There are also reports about Hurricane Barry being downgraded to a tropical depression and a report from the EIA forecasting an increase in crude oil production from major US shale plays by 49,000 barrels a day in August to 8.546 mbpd. Technically, prices look to break $58.90 per barrel, which will press on the price to test the most important support to the short term trades at $57.30 per barrel before any new positive attempt, Ajay Kedia said.
Source: financialexpress.com