Oil’s signs of life
The power struggle in the Saudi royal family comes at a time when global crude oil prices had already begun to inch up. The price of a barrel of Brent crude has crossed the $60 mark for the first time in two years.
The International Monetary Fund has said in its regional economic outlook for the Middle East and Central Asia that Saudi Arabia will need to sell oil at $70 a barrel if it is to keep its budget in balance next year.
That is a sharp decline from the break-even level of $96 a barrel estimated in 2016, but also an indication of the level that the Saudi Arabian government would like oil to trade at in order to maintain the country’s fiscal health.
The global commodity cycle is still a great distance away from the peaks of early 2014, but Indian policymakers must focus on the fact that the recent jump in crude oil prices comes in the wake of the sharp recovery in metals prices. Indian macroeconomics are still stable, so what policymakers need to do is to remain vigilant rather than panic.
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