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Drop in oil prices will help lessen Sri Lanka’s import bill
View(s):Oil is set to hit US$ 10 a barrel, international reports said, and this will provide relief to the Sri Lanka Government whose import bill will lessen on account of the decline.
Prices are dropping due to storage space running out to stock the extra oil that Saudi Arabia is planning to produce despite global demand for energy continuing to fall over the Covid-19 crisis.
In Sri Lanka, the Government has vowed to maintain current fuel prices while also imposing a duty on fuel imports to recover profit margins from petroleum imports. The savings—anticipated to be nearly Rs 200bn over six months–will go into a “fuel price stabilisation fund”.
The fund will provide Rs 50bn to the Ceylon Electricity Board (CEB) to reduce its debt to the Ceylon Petroleum Corporation—which, in turn, will settle its liabilities with the Bank of Ceylon and People’s Bank.
In January, major refineries in China were shut down to control the outbreak of the coronavirus. International reports said the oil industry is expected to keep filling storage with crude in the weeks and months ahead, cutting demand for natural resources including oil.
The global oil industry may increasingly look to offshore oil tankers to store their extra crude oil, but for this to be economic it would require oil prices to fall further, the Guardian said, citing analysts.
The global oil price fell to lows of $25 a barrel a last week, from more than $65 at the start of the year, and remains below $30 a barrel.
The world’s oversupply of oil is expected to balloon next month when an agreement between the Opec oil cartel and Russia to hold back oil production is due to end, the Guardian reported. The collapse of the deal allows Saudi Arabia, Opec’s de facto leader, to race Russia to increase oil production in a bid to grab a greater share of the market.
The oil price war is expected to raise the world’s oil production by more than 2.5m barrels of oil a day, which would outpace demand for crude by 6m barrels of oil a day.