Oil prices rise amid Middle East tensions

  • With the increase in crude prices, the union finance ministry raised the windfall tax on the sale of domestic crude oil to 9,600 a tonne with effect from Tuesday.

Rituraj Baruah
First Published16 Apr 2024
Prices rose on Tuesday after they eased in the previous session following Iran's missile attack on Israel, which ultimately caused less damage than initially feared.
Prices rose on Tuesday after they eased in the previous session following Iran’s missile attack on Israel, which ultimately caused less damage than initially feared.

New Delhi: International crude oil prices traded higher on Tuesday amid ongoing tensions between Iran and Israel and the resultant volatility in the global energy market.

At 10.05 am, the June contract of Brent on the Intercontinental Exchange was trading at $90.57 a barrel, up 0.52% from its previous close. The May contract of West Texas Intermediate on the NYMEX rose 0.59% to $85.91 a barrel.

Rahul Kalantri, vice president for commodities at Mehta Equities Ltd, said: "If tensions continue to escalate in the Middle East, it could certainly bolster crude oil prices. Expectations are for crude oil prices to maintain their volatility in today’s trading session."

Prices rose on Tuesday after they eased in the previous session following Iran's missile attack on Israel, which ultimately caused less damage than initially feared.

Kalantri said, "This decline was further compounded by the strength of the dollar index, which is currently trading at five-month highs, surpassing the 106 mark once again and thereby limiting the upward movement of global commodities. Nevertheless, a statement from the Israeli army chief regarding potential retaliation against Iran provided some support for oil prices at lower levels," he added.

According to a note by Moody's Analytics released on Monday, oil prices could increase by another $5 a barrel to $95 a barrel, and could breach $100 a barrel if the conflict escalates.

The Indian basket of crude oil was at $91.20 a barrel as on 12 April. It has averaged at $90.55 a barrel in April, against $84.49 in March.

With this increase in crude prices, the union finance ministry has raised the windfall tax on the sale of domestic crude oil to 9,600 a tonne with effect from Tuesday. The levy stood at 6,800 a tonne for the past two weeks. The windfall tax on the export of petrol, diesel and aviation turbine fuel remains zero.

The centre first imposed the windfall taxes on the sale of locally produced crude oil from 1 July, 2022 as oil exploration and producing companies made huge profits amid multi-year-high crude oil prices following Russia’s invasion of Ukraine.

The additional levies are reviewed every fortnight based on average oil prices in the previous two weeks. With oil prices expected to surge, the windfall tax could also increase increase further.

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