7% increase in crude oil prices, reached at its highest point in 7 months

The chart reached its highest point in seven months as a result of a 7% increase in crude oil prices.

The significant news then emerged. At a time when it is anticipated that crude oil prices will increase dramatically, Aramco, the largest oil refiner in the world, is apparently considering a $50 billion share sale.

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The follow-on sale of shares to the general public may occur before the end of the year, according to a Wall Street Journal report quoting sources. Since its initial public offering (IPO) in 2019, the firm, which is controlled by the Kingdom of Saudi Arabia, has sold a total of three shares.

For Aramco, rising oil prices are advantageous since they increase the value of its stock. Saudi Arabia had previously chosen to postpone the share sale due to unfavourable market circumstances.

Increased Crude oil prices and reduced profit margins

Due to pressure on crude oil prices, Aramco's profit fell 38% to $30.1 billion at the end of June 2023.

It is anticipated that oil prices will likely increase considerably further. For instance, Barclays predicts that the price of crude oil could reach $97 per barrel in 2024. The Saudi Press Agency reported earlier in August, citing sources, that the country intends to reduce oil production by a billion barrels per day.

According to Goldman Sachs, oil will cost $93 per barrel in the upcoming 12 months.

Reduced supply resulted into high oil prices

If the formal decision—which has yet to be made—is implemented, this will be the third consecutive month of output reductions. The market price of crude oil increases as production is reduced.

This is problematic for a nation like India, which imports more than 80% of the crude oil it consumes. If the price increases, the subsequent increase in the cost of fuel and diesel will exacerbate the present inflation issue.

Indian Government attempt to ease inflation

The Indian government has made hints that it would want to lower petrol prices to make life easier on consumers and voters as it prepares for elections in both states this year and at the national level next year. It announced a decrease in the cost of cooking gas last week. A rise in the price of crude oil could, however, reduce the likelihood of this action or increase the exchequer's cost.

The Reserve Bank of India has made it clear that, if required, it will control inflation by raising interest rates further. India already has significant food inflation because of unpredictable rains and supply shortages. Crude oil price increases will only exacerbate the situation.

Inflation exceeding 6% is not tolerable by RBI

The RBI's maximum tolerance limit for consumer price inflation is 6%. The Indian economy does not benefit from a rise in crude oil prices.

The most recent consumer price index for July revealed an increase of more than 7.4%. If things deteriorated more, the Indian central bank might change course and resume raising interest rates, something the equity markets find unappealing.

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