As Teheran hit oil infrastructure in Gulf nations on Thursday in retaliation to earlier Israeli strikes on Iran’s South Pars gas field, energy markets went into an overdrive with the benchmark Brent crude prices jumped to over USD 119 a barrel before settling down to around USD 114 a barrel.
The Indian basket or the average price at which India imports crude also shot up to USD 114.08 a barrel as against USD 69 a barrel last month, as desperate Indian buyers contracted purchase of crude from Russia’s shadow fleet which lies in the Baltic and in the Indian Ocean which after selling at a discount for most months last year is now trading at a premium.
“Our fears of oil prices shooting up to USD 130 are now almost a reality. Gas prices have also shot up considerably from about USD 11-12 earlier to USD 19 per metric million Btu,” said Sandeep Johri, a commodities trader.
With oil on the boil, India’s Rupee traded at a new low of Rs 93.25 at close of Thursday’s trading against the dollar as Indian importers faced with higher prices bought more dollars and as nervous foreign investors old off stock bringing the Sensex down by 2,496.89 points.
Oil prices started shooting skywards after news spread early Thursday that Iran targeted energy infrastructure across the Gulf, including Qatar’s Ras Laffan LNG facility and the Habshan gas facility and Bab field in the United Arab Emirates.
These attacks were apparently in retaliation to Wednesday night’s Israeli strikes on Iran’s South Pars gasfield.
Qatar’s state-owned energy company, QatarEnergy, confirmed that several of its liquefied natural gas (LNG) facilities were hit by missile attacks in the early hours of Thursday. No casualties were immediately reported, though emergency services were deployed to extinguish fires.
Possibly fearing the fall-out on global markets, US President Donald Trump said on his social media platform that the US had no prior information on Israel’s strikes against Iranian oil infrastructure and promised that there would be “no more attacks will be made by Israel” on the South Pars field unless Iran again strikes Qatar’s LNG facilities.
“In that instance,” Trump warned, “the United States, with or without Israel’s consent, will massively blow up the entirety of the South Pars gas field with a level of force Iran has never seen before.
Markets are betting that given the present belligerent mood and lack of any visible signs of a peace reconciliation bid, the war will drag on. “In which case oil is likely to hit USD 150 to the barrel,” said Johri.
For every USD 10 rise in global crude oil prices, India’s annual import expenditure increases by about USD13–14 billion.
“This war is extracting more than its pound of flesh from non-combatant nations. We will have to brace for a current account deficit an inflationary pressure on our economy even after the peace pipe is smoked,” said Biswahit Dhar, former WTO chair at the Indian Institute of foreign Trade. Jayanta Roy Chowdhury
