Asian economies exposed to large oil import bills can breathe a sigh of relief as international crude oil prices settled between 28-30% lower at the close of trading on Tuesday, after hitting lofty peaks in early October, according to analysts. The rise in crude prices had an impact on both their current account positions and their domestic currency for much of this year. Concerns over inflation led in part by higher crude prices contributed to their economic woes for much of this year.
On Tuesday, front-month ICE Brent crude futures settled at a near one year low at $62.53/barrel, falling from a record high of $86.29/b on October 3. Front-month NYMEX WTI crude futures on Tuesday ended the trading session to settle at $53.43/b — a 13-month low — after peaking as high as $75.41/b on October 3. “As one of the world’s largest net importers of oil, India should be a key beneficiary of the recent slide in global oil prices. If prices remain lower, as we think likely, the oil import bill will fall and the current account deficit should shrink,” Capital Economics said in a note Wednesday.
In addition, the recent sharp fall in international outright oil prices could help allay concerns over Asia’s faltering purchasing power in the energy markets amid continued weakness seen in various emerging market currencies. Risk-sensitive Asian currencies including Vietnam’s Dong, Indian Rupee and the Indonesian Rupiah saw their domestic units fall to multi-year lows against the U.S. dollar in recent months and the bearish trend is expected to continue with the US Federal Reserve maintaining a hawkish monetary policy stance, currency and fixed-income market analysts said. The drop in oil prices could ease some pressure off the Asian crude importers’ weak dollar purchasing power in the international markets, analysts added.