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Part 2 – Why Petrol at the pump should be costing a lot less

The stock market correction worldwide could help lower crude prices and relieve pressure on India's Current Account Deficit

Team PGurus

October 12, 2018

The stock market correction worldwide could help lower crude prices and relieve pressure on India's Current Account Deficit

Part 1 of this series can be accessed here. This is Part 2.

One of the reasons given for the carnage in the Stock Market is that the price of Crude is going up and hence there is pressure on the Rupee. Compound this with the fact that Iran, as a supplier may go away for India, necessitating more dollars for buying crude, thus further draining India’s foreign exchange. Well, help may be along the way.

Crude fell about 2% on October 10^th (all forms such as WTI, Brent etc.) and might fall further. In addition, ZeroHedge.com is reporting that Saudi Aramco will supply about 4 million barrels of additional crude to Indian customers for November, according to a person familiar with the matter[1]. That’s on top of their monthly contractual supplies from Aramco. This, taken with the fact that India will continue to buy crude from Iran and pay for it in rupees/ barter should ease the pressure on the Rupee as well as the price at the pump.

Futures for Crude

As of today, the Crude oil futures point to a gradual decline in price, with January 2019 ranging between $77 to $65. But with the Dow shrinking significantly in the past two days, there is going to be acute pressure on Crude to drop too.

Stock Market correction

India’s Stock Markets heated up amazingly in the past four years, with both SENSEX and NIFTY 50 registering close to 50% growth (an average of 12.5% every year). The current correction, on the assumption that Foreign Institutional Investors are withdrawing money from India ($11 billion in the last 30 days according to some estimates) should not be taken as a lack of faith in India’s markets – rather it is an engineered crash, as predicted by Prof. M D Nalapat in February of this year[2].

Rupee should start appreciating

PM Modi needs to step in quickly and squelch the murmurs that Naked shorting of the Rupee is happening. If so it must be banned with immediate effect. India is the fastest growing economy in the world and this should start reflecting in the value of the rupee.

References:

[1] WTI Slumps to 2-Week Lows After Biggest Crude Build in 20 Months – Oct 10, 2018, ZeroHedge.com

[2] Insider Vulture Cabal operating with impunity – Sep 8, 2018, The Sunday Guardian

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