Retail fuel prices in India have remained unchanged for weeks, despite the drastic change in the crude oil price. As the demand is almost a fraction and the government is not able to realize the benefits from price fall.
In this article, we will talk about why India is not gaining from the drop in the crude oil price, about WTI crude oil futures, Crude oil ETF.
So without any further delay lets start the discussion.
Crude oil prices in the US may have fallen to a historic minus $37.63 a barrel on Monday due to coronavirus. The demand issues and inability to store for future use. It will have a ‘nil or very marginal’ impact on the Indian economy and fuel prices, say experts.
Reason why India is not getting benefits from the drop in the crude oil price
The main reason is Indian oil companies, mainly public sector oil companies, are not dependent on the WTI benchmark index. Their share of purchases are from the Middle East, mainly Dubai and Oman axis, and are based on Brent crude benchmark prices. The latest at $22.41 per barrel and the Indian basket priced at $20.56 per barrel. Russia has already announced a nearly 10 percent cut in production to lift the dipping crude oil prices.
Since there are more settlement options for Brent crude futures, their prices haven’t fallen as sharply. Even so, Brent crude, which is the more relevant benchmark for India, has dropped over 65% so far in 2020.
The ICE West Texas Intermediate or WTI Crude Oil Futures Contract offers participants the opportunity to trade one of the world’s most liquid oil commodities in an electronic marketplace. The contract not only brings the benefits of electronic trading a US light sweet crude maker. But also brings together the world’s three most significant oil benchmarks on a single exchange: Brent, Middle East Sour Crude and WTI. This offers a reduction in collateral requirements through the offsetting of margins.
Crude Oil ETF
Oil and gas exchange-traded funds or crude oil ETF offer investors more direct and easier access to the often volatile energy market than many other alternatives.
Crude Oil ETF tracks the price changes of crude oil, allowing investors to gain exposure to this market without the need for a futures account.
However, logistics and supplies of the fuel have not been affected in most countries. And it is not easy to shut down oil-producing wells, said sources.