Oil prices jump as Iraq violence fuels supply worry

Written by ENS Economic Bureau | New Delhi | Updated: Jun 17 2014, 15:08pm hrs
OilTurmoil in Iraq and Ukraine have sent gold and oil prices in a tizzy.
Turmoil in Iraq and Ukraine have sent gold and oil prices in a tizzy. Brent crude was above $112 a barrel on Monday, gaining more than 4 per cent, highest since July last year, while spot gold rose to $1,280 an ounce, highest since May 27.

Brent crude for August delivery was up 4 cents at $112.44 a barrel after touching an intra-day high of $113.12. US oil was up 10 cents at $107.01 a barrel, after reaching an intra-day high of $107.54 in Asian trading.

Experts said the advances by Sunni insurgents in Iraq will further push headline inflation, which rose 6.01 per cent in May, by disrupting the oil export. Increase in crude oil prices is likely to have adverse impact on domestic fuel prices and will add pressure on fuel subsidies.

Indias import bill will also shoot up, widening the current account deficit.

Iraq is the second largest oil producer amongst OPEC members, and second largest importer for India after Saudi Arabia. India imported 24.5 million tonnes from Iraq in the last fiscal while 32.5 million tonnes from Saudi Arabia.

The yellow metal, meanwhile, further strengthened at the domestic bullion market, climbing up by Rs 325 to close at Rs 27,650 per 10 grams from last Saturdays closing level of Rs 27,325. Silver too surged by Rs 545 to finish at Rs 43,150 per kg as against Rs 42,605 previously.

As a result, the government increased the import tariff value on gold and silver to $411 per 10 grams and $632 per kg. In the first fortnight of this month, tariff value on imported gold stood at $408 per 10 grams and silver at $617 per kg.

The import tariff value is the base price at which customs duty is determined to prevent under-invoicing. It is revised on a fortnightly basis, taking into account the volatility in global prices.