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This adjustment follows an earlier increase at the beginning of the month, when the windfall tax on domestically produced crude oil rose from Rs 1,700 to Rs 3,200 per tonne.
The tax, imposed as the Special Additional Excise Duty (SAED), was first introduced on July 1, 2022, aligning India with other countries that impose taxes on the supernormal profits of energy companies. These tax rates are subject to fortnightly reviews, based on the average oil prices observed in the preceding two weeks. . The Indian government’s windfall tax on crude oil producers since July 2022 has also hurt the bottom line of crude oil producers.
Brent crude futures on Thursday were hovering around $81.43 a barrel. The International Energy Agency in its monthly oil market report highlighted a slowdown in global oil demand, leading the agency to revise its growth forecast for 2024 to 1.22 million barrels per day (bpd) from 1.24 million bpd. Additionally, the IEA projected that oil supply will increase by 1.7 million bpd this year, up from its previous estimate of 1.5 million bpd.
Meanwhile, U.S. crude inventories experienced an unexpected surge, rising by 12 million barrels to 439.5 million barrels in the week ending February 9, as reported by the Energy Information Administration (EIA). This increase far exceeded the expectations of analysts in a Reuters poll, who had predicted a rise of 2.6 million barrels.
The combination of diminishing oil demand and rising supply has put pressure on oil prices. Furthermore, the news of two major economies, Britain and Japan, falling into recession has contributed to the downward trend. Britain’s gross domestic product (GDP) contracted by 0.3% in the last three months of 2023, following a 0.1% shrinkage between July and September. Similarly, Japan unexpectedly slipped into recession at the end of last year. However, despite concerns over global economy, oil prices have been supported on worries over Israel-Hamas war.
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