Stock Market · Currency, Commodity & GSec

Crude oil

Crude oil is the world's most traded commodity and India is the world's third-largest importer. Understanding crude oil dynamics helps explain inflation, currency moves, and stock performance.

Two key benchmarks

• Brent Crude (North Sea): global benchmark. Used for pricing most Asian, European, and African oil.
• WTI (West Texas Intermediate): US benchmark. Prices US domestic production.

India mostly follows Brent pricing. MCX crude futures are also linked to WTI.

What moves crude prices?

• OPEC+ production cuts: Saudi Arabia and Russia control output. Cut production → higher prices.
• US shale output: when prices rise, US shale producers pump more → natural ceiling on prices.
• Geopolitical events: Middle East tension, Russia-Ukraine war, Iran sanctions.
• US Dollar strength: crude is priced in USD. Stronger dollar → cheaper crude in USD, but not in INR.
• Global demand: China's economic activity is the single biggest demand driver.

> Every $10 rise in Brent crude adds approximately 0.3-0.5% to India's current account deficit. This weakens the Rupee and pressures RBI to raise rates.

Trading crude on MCX

• Contract: 100 barrels per lot
• Price in ₹ per barrel
• Crude at $85/barrel = ₹7,100 per barrel at ₹83.50/USD
• One lot value = ₹7,10,000. Margin ≈ ₹35,000-50,000.

Highly volatile. Moves of ₹100-200/barrel in a day are common during geopolitical events.

Takeaway. India imports 80%+ of crude oil. Every $10 Brent rise widens India's current account deficit, weakens the Rupee, and drives inflation. OPEC+ decisions, US shale output, and China demand are the key price drivers.