Crude oil may touch $175 a barrel by Diwali: Experts

Skyrocketing crude oil prices are likely to continue the upward march and could reach 175 dollar a barrel by Diwali unless there is significant decline in demand from growing economies, analysts say.

Crude oil prices have risen by about 40 dollars since March. Currently on New York Mercantile Exchange, oil traded near record high levels around 142 dollars.

"Considering the current situation and pace of price rise, crude oil rates may go up to 175 dollars per barrel in the global market. Prices may get fresh triggers, if Israel attacks Iran this year which would affect Mideast supplies," Religare Commodities Head (Commodity Business) Jayant Manglik told reporters.

High volatility spurred by uncertain geo-political tensions, slumping US economy and spiralling demand across the world would continue to support the already high crude oil prices, he said.

If you look at the technical chart, prices have moved upwardly in the last six months and we expect the bullish trend to continue further in the coming months. Prices may go beyond 175 dollars per barrel and touch 200 dollars per barrel," Mumbai-based Kotak Commodities Services Technical Analyst Dharmesh Bhatia said.

Amid the rising crude oil prices, there seem to be no respite for India and other countries, which are reeling under high inflationary pressure.

"Oil demand is rising higher than the supply. Although it is difficult to predict how much prices would inch up but they may rally in the range of 140-150 dollars per barrel,"Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) expert Anjan Roy said.

"Price rise is driving countries to look at alternative energy and conservation of energy. I think this would keep a check on a rise in additional demand for crude oil," Roy added.

According to experts, crude oil prices would decrease only when the demand falls significantly, which seems unlikely, or there is improvement in supply position. Currently, the global demand is approximately 87 million barrels a day against the supply of 82 million barrels a day.

"The prices will decline only when demand falls, of which there is no clear evidence so far. But when demand starts falling due to degrowth, prices will also decline and this will lead to a downward spiral with low prices and increased supply," Manglik said.

A similar scenario was witnessed in the late nineties when high crude prices punctured fast-growing South East Asian economies and led to a downward spiral, he said. Roy said the prices could be brought down only if the supply gap is addressed.

Govt taking steps to tame inflation - Finance Ministry

The federal government is taking steps to tame inflation that was mainly driven by high commodity prices, a finance ministry statement said on Tuesday.India's wholesale price index rose to 13-year high of 11.42 per cent in mid-June, after the government raised retail fuel prices by 10 per cent last month. "Though this is the highest inflation in the last 13 years, it is largely commodity centric. Government is taking measures to moderate the inflationary pressure," the statement said, without specifying.

Reeling out data, the ministry said around 60 per cent of the increase in the prices of primary articles was accounted for by five commodities - iron ore, cotton, milk, fish and oranges. Even in the manufacturing sector, nearly 60 per cent of the increase was accounted for by eight products, six of which belong to the category of iron and steel products.

Last month, the central bank raised its key lending rate twice, first by 25 basis points and again by 50 basis points, to rein in inflation