Crude oil rallies as Iran stops oil supplies

Business

oi-Sunil

By Sunil Fernandes

Published: Monday, February 20, 2012, 11:09 [IST]

Crude oil rallied on reports that Iran will stop shipping crude to British and French oil companies. Brent Crude was trading at $121.10 per barrel, up $1.52 at 10.45 am IST. Nymex Crude spiked even more sharply and traded at $105.35, up by $1.75 per barrel.

Reports that The People's Bank of China had cut the reserve required ratio, also saw renewed demand for crude. Analysts believe that crude would continue to trade firm amidst the escalating tensions with Iran and the easy liquidity conditions prevailing in the markets.

In fact, a gush of liquidity, especially from the European Central Bank has seen commodities, including crude rallying over the last six weeks.

Rising crude is not good news for India, since it has an effect on inflation and fiscal deficit. While diesel, which is not yet decontrolled, pushes up the fiscal deficit, petrol which is now linked to market rates, causes a spike in inflation.

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