The 20 per cent spike in the benchmark Brent crude oil price on Monday in a record intra-day move is perhaps a knee-jerk reaction to the weekend drone strikes that knocked out half of Saudi Aramco’s production capacity and interrupted global crude oil supplies to the tune of 5.7 million barrels per day.
With the market carrying comfortable inventories and the US immediately releasing some of its strategic petroleum reserves, immediate supply shocks to consumers from this 5 per cent dent to global output appear unlikely. But oil price trends over the medium term will be dictated by how long it takes Saudi Aramco to restore normalcy.
More importantly, this episode is a sharp reminder to import-dependent countries like India that they have been unduly complacent in taking benign oil price trends for granted.Read more
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