Oil prices are important as India imports more than 80% of its oil and around two-thirds of that come from the Middle East, according to the Bloomberg data.
After gaining for seven consecutive trading sessions, the rupee on Monday fell 67 paise to close at 71.59 against the dollar as crude oil prices soared following drone attacks on Saudi Arabia’s oil facilities on Saturday. Brent crude prices shot up to as high as $70.56 per barrel on Monday.
Oil prices are important as India imports more than 80% of its oil and around two-thirds of that come from the Middle East, according to the Bloomberg data. Indian oil imports account for a major part of the country’s overall imports.
Independent consultant MS Gopikrishnan pointed out that the rupee has been under pressure because of the global slowdown, outflows from equities and several other factors. “Oil being stable all this while was the only comforting thing for the currency. Now due to potential escalation, oil prices are going to be volatile. This has pushed traders into worries. Hence, we might see more risk aversion,” he said.
The Dollar Index rose 0.25% to 98.49 from its previous close of 98.25. The rupee was the biggest loser among the Asian currencies on Monday as it fell 0.93% against the greenback. The Indonesian rupiah and the South Korean won fell 0.53% each on Monday.
MV Srinivasan, vice-president, Mecklai Financial Services, explained that Saudis have oil reserves which they may consider releasing to avoid severe supply disruption. “The US also said that if the need arises, it will release oil from their strategic reserves. In that case, crude oil prices might remain under control,” he said.