NEW DELHI: Shock waves from the quake and the subsequent tsunami that hit Japan on Friday brought down global oil prices. Crude shed nearly 2% of its weight in both London and New York commodity markets as reports of damage to several Japanese refineries stoked fears of reduced demand from the world's third-largest oil consumer.
Several refineries, aggregating a capacity of 824,000 bpd (barrels per day), on the eastern parts were shut down after the quake that preceded the tsunami. An extended outage of Japanese refining capacity is expected to keep oil prices down. This would provide a breather to economies such as India that are heavily dependent on imported oil.
According to US Energy Information Administration, Japan consumed 4.4 million barrels per day of oil in 2009, behind only the United States and China. This is nearly three times more than Libya's production of 1.6 million barrels a day before the unrest began. Futures in Brent crude fell $2.60 per barrel to $112. The benchmark WTI contracts on the New York Mercantile Exchange too dropped $1.8 a barrel to pull prices below $100 for the first time in a week. But the benefit could be wiped out by higher prices of refined products and gas in ships, or LNG (liquefied natural gas).
Higher products prices will keep up the pressure on India's state-run refiner-marketers. Both prices of crude and refined products in Dubai and Singapore trading hubs have a bearing in determining market price of fuels but they have to sell at artificially low prices under government diktat.
Already, agencies reported a spike in the price of gasoline in night trading on the Tokyo Commodity Exchange.
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