By Rohit Vaid
New Delhi, Feb 26 (IANS): Continuing hostilities between Russia and Ukraine as well as rising demand is expected to keep global crude oil prices in the range of $90-to-$100 per barrel in the short to medium term.
For India, the price range is a cause of concern as it may add Rs 8-to-Rs 10 in petrol and diesel's selling prices, if the OMCs decide to revise the current prices.
At present, India imports 85 per cent of its crude oil needs.
Besides, the cascading effect of higher fuel cost will trigger a general inflationary trend.
Already, India's main inflation gauge -- Consumer Price Index (CPI) -- which denotes retail inflation, has crossed the target range of the Reserve Bank of India in January.
The rise was blamed on high commodities costs.
As per industry calculations, a 10 per cent rise in crude oil prices adds nearly about 10 basis points in CPI inflation.
On Friday, a rise in the US oil inventories along with assurance of energy supply from Russia doused international crude oil prices.
Consequently, the price on Friday came down to $95 per barrel after the Russia-Ukraine war pushed Brent Crude Oil prices to $105 per barrel.
The present geopolitical tension has pushed Brent oil price from $80 per barrel to $105 per barrel for the first time since September 4, 2014.
Notably, Russia is one of the world's top producers of crude oil and any western sanctions against the country will stiffen the global supply.
"Crude oil prices are expected to remain elevated due to geo-political tension, short supply and huge demand. Prices are expected to remain between $95 to $100 per barrel," said IIFL Securities VP, Research, Anuj Gupta.
"If the government announces any price revision then high crude oil prices will increase the cost of petrol by Rs 8-10 a litre in India."
According to Kshitij Purohit, Lead Commodities and Currencies, CapitalVia Global Research: "We may see the Brent market drop near the $90-$91 levels. The overall market temperature was moderated ahead of the weekend as a new round of sanctions imposed by Western nations failed to impede Russia's ability to sell commodities such as crude oil."
"They (NATO or European countries) are not expected to put more sanctions on Russia as the high price of crude and gas will elevate the inflation in the world and the US is already worried over the 40 years high inflation levels."
On the impact of high crude oil prices on domestic fuel cost, Purohit said that previously, the government announced that it would use strategic reserves to reduce fuel price inflation, which may be dismissed in context of the present geopolitical situation.
"This could result in a price increase in domestic current fuel charges in the near future."
In addition, Tapan Patel, Senior Analyst (Commodities), HDFC Securities said: "The traders and investors are closely watching the Ukraine crisis as Western world is readying for more sanctions on Russia. However, the oil supply scenario is expected to remain intact with assurance of energy supply from Russia."
"We can expect Brent oil prices to hover in the current range of $90 to $100 per barrel till the sky gets clearer."
Furthermore, he said that the elevated oil prices for long period of time may result into the hike in fuel prices by Rs 10 per litre.