Oil prices zoom above $107 after fresh strike on Saudi, Hormuz

NEW DELHI: Oil prices increased more than USD 3 per barrel at the market open on Monday following more strikes on Saudi Arabia and ships in the Gulf on Sunday.

Brent crude futures increased USD 3.62 or 3.46 per cent to USD 108.23 per barrel as of 2214 GMT (Sunday). WTI futures increased USD 3.15 or 3.15 per cent to USD 103.20 per barrel.

On Sunday, Saudi Arabian official media published video footage of what it claimed was a Houthi raid on the country’s southern Jazan area, resulting in damage to homes and a mosque. Additionally, the Houthis claimed to have attacked a Saudi military installation in a nearby region.

Meanwhile, despite recent robust GDP growth figures of 7.8 per cent, the spike above USD 107 per barrel presents a critical fiscal and budgetary challenge for India, which depends largely on petroleum imports to run its own economy.

Although India has made progress in diversifying its import basket by obtaining oil from the US, Russia and Latin America, industry experts have pointed out that the basic problem is price exposure.

This is how an increase in crude oil could affect the Indian economy, for instance, it will lead to fiscal burden, which suggests that depending on fluctuations in foreign exchange, every USD 10 rise per barrel corresponds to an expected additional outflow of at least USD 2 billion from the economy.

Furthermore, long-term high crude prices will put pressure on state-owned oil marketing firms, driving up retail fuel prices, headline inflation, and government spending.