The sharp fall in global crude prices - hitting a two year low of $92 per barrel from the normal range of $110 to $115 per barrel - has mainly been due to the fact that internationally demand for the precious commodity has weakened owing to a supply overflow, which earlier this week even forced the world's top supplier Saudi Arabia to cut prices. The situation though has helped India as petrol prices have come down and may fall further in the next few weeks.
Also with the US ramping up its supply of shale oil, the resultant supply glut has forced major oil companies to offer competitive prices. According to analysts, another significant factor behind the declining prices of crude is that the supplies from Iraq have been normal, as the militant group ISIS, which is ravaging Iraq, has not been able to reach the country's oil fields.
"All this is basically good news for India, as it has led to a fall in petrol prices. Globally speaking, supplies from Iraq (which is the second largest source of oil for India after Saudi Arabia) have been normal as ISIS rebels have not been able to reach that country's oil bases. Also with global demand being weak, the prices have been coming down steadily," said Debasish Mishra, Senior Director, Consulting, Deloitte Touche Tohmatsu India Pvt ltd.
In another significant move, Saudi Arabia's state producer Saudi Aramco on Wednesday announced major cuts in its prices. This, experts said, led to further lowering of prices globally, and was also seen as an effort by the country to retain its top spot as major supplier of crude in the world, amid rising competition from other companies offering customer-friendly prices owing to poor demand. Industry watchers also said that the move to cut prices by Saudi Arabia interestingly came at a time when OPEC nations batted for hiking crude prices as international Brent crude oil prices have slid to a two-year low.
"Another positive impact of falling crude prices and the move by Saudi Arabia is that all the traders who had got stuck with long positions, are now unwinding and seeking physical deliveries of barrels," Mishra added. Amid the cut in crude prices initiated by Saudi Arabia, global media reports said that traders will now be looking forward to the OPEC meeting scheduled to be held in Vienna in November, to see how the group reacts to this move.