Weekly Bitumen Report: Why India Experienced the Second Consecutive Fall while Crude Oil was in it Upward Mode?

In the 113^th day of Russia- Ukraine war, Ukraine refused the ultimatum of Russia to surrender Sievierodonetsk, although 80% of this city has been invaded by Russia and a large population of it are stuck in the city. At the same day, Emmanuel Macron, German chancellor Olaf Scholz and Italian prime minister Mario Draghi arrived in Kyiv on Thursday morning to send a “message of unity” and talk with president Volodymyr Zelensky.

Oil price started an upward trend and touched 123 US dollars and ultimately it reached to 116 US dollars at the time of preparing this report. As Infinity Galaxy frequently mentioned since the beginning of the June, the range of oil price will be around 110-125 in this month.

The Federal Reserve of the United States announced the largest increase of interest rate since 1994. This increase was observed while USA experienced the highest level of inflation in May and June 2022. The interest rate of USA increased up to 1.5 – 1.75. since March 2022, USA experienced the third increase of interest rate which was due to the high inflation observed in May. The bank has also declared that more increase of interest rate is also probable. However, by the increase of inflation rate and equity of US dollar against other currencies, oil price did not decrease significantly unlike the traditional expectation.

On June 15, the Indian refineries decreased bitumen price up to 26.5 US dollars. Considering the observed fall in the first half of June, India experienced an overall drop of around 64 US dollars that is large number for a single month. This fall was observed in a situation when oil price was on higher side comparing to last month and Singapore bitumen price was around 590- 600 US dollars.

There can be two probable scenarios for the frequent fall of bitumen price in India:

• Approaching monsoon season
• Change of US Dollar equity against IN Rupees, this change has made the importers uncertain whether the current import price will be economical or not.

Although the shipping lines were repeatedly announcing a new wave of BAF implementation from 1 June, the transportation costs faced some drops or got fixed due to global inflationary stagnation and reduction of export levels.

There are less hopes to achieve any positive results in JCPOA negotiations and equity of US Dollar against Iran Rial has reached its highest possible level in the history and bitumen price faced a drop of around 15 US Dollars while all other costing factors were upward. As a result, the lowest level of export during the last months was recorded.

In the current situation, the concerns of more continuous inflation and international crises have made the traders worried about the long-term investment. As Infinity Galaxy mentioned in its last six reports, the current situation is not appropriate to invest in oil-based businesses and deals need to be made only based on the confirmed available order.

This article was prepared by Razieh Gilani, the export manager of Infinity Galaxy (www.inifnitygalaxy.org).