ET graphics: Volatility hits oil market

Worries of oil prices rising further have spooked the markets and triggered a 642 points fall in the benchmark Sensex index on Tuesday. Oil prices jumped after a drone attack on a major Saudi oil facility that halved output from the OPEC heavyweight. ET looks at the risks in the extremely volatile market in which crude oil prices fell $6 on Tuesday evening.

The Outlook

• Markets have been nervous as Saudi Arabia showed no hurry to reveal details of the damage.
• Oil prices will certainly fall after Saudi Arabian supplies resume
• Most analysts say the risk for India is the price, not supply of oil

Risks for India

• India’s economy is already slowing down. Costly oil will cause further damage
• Higher oil prices have a cascading impact on prices of all other goods
• Higher oil bill will increase current account deficit and put pressure on the rupee
• The rupee has already fallen, which will lead to a bigger impact on retail fuel prices in India
• Fiscal deficit will be impacted as subsidies will rise