Oil hits $95 per barrel amid supply worries: Report

 LONDON: The oil price is continuing its march towards $100 a barrel for the first time in almost a year, creating new inflationary headaches for central bankers, a media report said.

Brent crude, the international benchmark, pushed over $95 per barrel on Tuesday, the highest since November 2022, The Guardian reported. Oil is being driven up by concerns of a supply deficit following recent output cuts by Saudi Arabia and Russia.

Brent crude began 2022 below $80 per barrel before soaring to around $130 per barrel after Russia invaded Ukraine last February, fueling the surge in inflation last year, The Guardian reported.

Higher oil prices risk making inflation more persistent, just at a time when central bankers are inching towards ending their cycle of rising interest rates. The US Federal Reserve may leave borrowing costs on hold on Wednesday, though the Bank of England may vote to hike again on Thursday.

Bjarne Schieldrop, chief commodity analyst at SEB, predicts that oil demand will weaken should prices continue to rise over $100 per barrel.

Schieldrop said, "The overall situation is that Saudi Arabia and Russia are in solid control of the oil market. The global market is either balanced or in deficit, and both crude and product stocks are still low.

"Thus, we have a tight market both in terms of supplies and inventories, so there should be limited downside in oil prices. We are highly likely to see dated Brent moving above $100 per barrel. It is now less than $5 per barrel away from that level, and only noise is needed to bring it above," The Guardian reported.

With rising crude oil prices in the international market pushing up the demand for dollars, the Indian rupee has slumped to a record low of 83.2675 vis-à-vis the U.S. dollar. Going ahead, much will depend on oil prices in global markets, which are now hovering around the $95 per barrel mark.

Although the RBI has been releasing dollars in the market to prop up the rupee, this has not been able to stem the slide of the Indian currency as the country imports around 85 percent of its crude oil requirement, for which immediate payments have to be made in dollars.

"The RBI will be there to defend the rupee with its ample stock of foreign exchange reserves and ensure that overall volatility is contained, but it cannot go beyond a point," said a foreign exchange expert at a private sector bank.

Foreign investments in the Indian stock markets have also helped to contain the volatility of the rupee, but this is "hot money" that can exit suddenly and cannot be relied upon, an analyst said. (IANS)

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