OIL & GAS

Why India’s oil price benefit may be short-lived and limited

Crude prices and equity values have for long tended to swing together. Some attribute this to the dollar-liquidity impact that crude leads to—when prices are high, supernormal profits lead to surplus money moving into others asset classes, and when oil prices drop, there’s less easy money flowing around. If you look at the Brent and Dow Jones Industrial Average Index trend, you’ll note that this symmetric relationship was disturbed in the middle of the last decade.

The entry of US and Canada in a big way into oil production, to safeguard their economies from high oil prices, led to a surge in supply. And with an eye not to lose market share, the OPEC coterie decided to pump more as well, focused more on retaining their market share, even as demand from large economies like China started to dip. This saw Brent crude prices drop-off from the highs of near $100 per barrel in 2013 and 2014 to broadly a range between $45-70 per barrel for most of the past 6 years.

Source
CNBC
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