Brent nears $113 on Iraq crisis. Here's why India should be worried

Brent crude has been in the news in the last few days with the prices of crude oil rising due to heightened geopolitical tensions in Iraq. Brent crude, was near $ 113 on Monday. And, like it or not, the international oil prices have a direct impact on the Indian economy as the country imports 80 percent of its crude requirements. Here are a few things that you need to know about Brent.

What is Brent: Brentis a kind of crude oil produced in North Sea, off the United Kingdom coast. It’s a benchmark for price for nearly 66 percent of world crude oil traded, right from Europe, Africa, and the West Asia. Though it is the most popular benchmark, this is not the only benchmark for price. There is Opec Reference Basket (Organization of Petroleum Exporting Countries) Dubai Crude (Persian Gulf) and West Texas Intermediate (Texas).

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[caption id=“attachment_86151” align=“alignleft” width=“380”]  Representational image. Reuters[/caption]

What’s special about Brent: The Brent’s speciality is that it is light and sweet, which means it is a low density oil. It has lower levels of sulphur, and refining this is easier.Hence it becomes suitable for production of petrol. Though Brent is light and sweet, it’s not as light and sweet as the West Texas Intermediate.

Trading and price difference: Currently Brent is electronically traded on the Inter Continental Exchange, or ICE, and New York Mercantile Exchange. All the types of benchmarks mentioned above have a price difference since each crude oil is different and exported to different locations. But all the benchmarks move in the same direction.

Why India should worry: One of the most important things to keep in we as a country meet our crude oil requirements via imports. If you take a look at the India crude basket, you will realise that Brent is a big chuck. The Brent crude futures held near $113 per barrel with the United States considering air strikes in Iraq as the security situation worsens in the key oil producing country. The rupee tumbled to its lowest level in nearly two months on Tuesday on the worsening geo-political crisis in Iraq. Since the rupee is weakened, it will push up domesticinflationpressures and alsoaggravatethe current account deficit. All in all, pretty bad news for the Indian common man.

Inputs from Reuters.