Crude oil prices slip below pre-Ukraine war level. How does it affect India?

resr 5paisa Research Team

Last Updated: 8th December 2022 - 10:03 pm

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In what may be one of the surest signs of an impending economic slowdown, global crude oil price has slipped below the $80 per barrel (bbl) price point, to pre-Ukraine war levels. U.S. crude futures fell 3 cents to $74.22 a barrel.

Tuesday's slump was the largest daily decline in Brent prices since late September. As a Reuters report noted, oil prices have dropped by more than 1% for three straight sessions, giving up most of their gains for the year.

How have Wall Street benchmarks been doing?

Wall Street benchmarks also tumbled on Tuesday on uncertainty around the direction of Federal Reserve rate hikes and further talk of a looming recession.

These fears are sparked by strong economic data or hawkish signals from other policymakers.

What does the latest US economic data show?

Data released on Monday showing U.S. services industry activity unexpectedly picked up in November and last week's robust U.S. payrolls report raised doubts about how soon the Fed might ease monetary policy.

And what about China?

Service-sector activity in China has hit a six-month low, and European economies have slowed due to the high cost of energy and rising interest rates.

But where does it lead India?

In the short run, India will of course benefit from falling crude oil prices as it imports nearly 80% of its energy needs and has to pay up in US dollars. So, in the short term it will help the country’s current account deficit.

But if the world at large gets into the grip of a recession, India too will not be spared. A demand slowdown will first impact the country’s export economy and then its domestic economy. Then, foreign money will look to fly back to safety, impacting its capital markets.

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