Brace up for shock as rupee slides, oil prices above $100

New Delhi, July 3: Future looks bleak for India with unstable rupee and rising crude oil prices. Oil prices pushed closer to $102 a barrel on Wednesday - the highest level in over a year - due to Egyptian crisis. Yesterday oil was $100 a barrel for the first time this year in New York trading.

Traders are worried about disruptions to Mideast supplies while anticipating an increase in oil demand in the US. Oil last crossed $100 a barrel on September 14, last year.

In London, Brent crude rose $1 to finish at $104 a barrel on the ICE Futures exchange.

Meanwhile, the Indian rupee again breached the key 60 mark against the US dollar on Wednesday. The partially convertible rupee traded at 60.25 against Tuesday's close of 59.66 as of 1.45 p.m. The rupee hit a low of 60.39 in intraday trade and is on track for a third straight day of losses.

Falling rupee means more dollars to be paid to buy oil in international market. As oil prices climb, the situation looks grim and India is in for double whammy.

Why Egypt matters in oil?

Egypt is not an oil producer but its control of the Suez canal, one of the world's busiest shipping lanes which links the Mediterranean with the Red Sea, gives it a crucial role in maintaining global energy supplies.

At the same time, rising tensions in Libya also hit oil prices. Oil workers at the Zueitina Oil Co. shut down several fields demanding changes in management, and the country's Sahara oil field stopped production over a security dispute. Because of this nearly a third of Libya's production has been affected.

Oil traders are also awaiting the Energy Department's weekly report on U.S. stockpiles of crude oil late on Wednesday and expect the figures to show an increase in demand. Data for the week ending June 28 is expected to show a drawdown of 3 million barrels in crude oil stocks, according to a survey of analysts by Platts.

OneIndia News