Asian Economies Would Welcome Lower Oil Prices

Prime Minister Narendra Modi has oil to thank for helping an economic revival in India. Whether his luck holds depends on a meeting in Vienna tomorrow.

Awaiting the outcome of the summit of the Organization of Petroleum Exporting Countries on Nov. 27 are other Asian leaders who depend largely on imported oil. While Chinese President Xi Jinping is looking at shoring up an economy on track to record its weakest annual growth since 1990, Japan’s Prime Minister Shinzo Abe is banking on OPEC’s 12 members sustaining production levels to stem his nation’s slide into recession.

Oil’s slump this year is good news for these nations, which are exposed to the risk of global price changes that affect their balance of trade. In India, which imports 80 percent of its oil, the key stock index has risen the most among Asian indexes this year as crude slumped.

“The lower the prices, the better for us,” K.V. Rao, finance director at India’s third-biggest state refiner Hindustan Petroleum (HPCL) Corp., said by phone. “We’ll watch how it unfolds on the 27th. We’re currently in a sweet spot.”

While China has signaled tolerance for weaker growth as the government tackles corruption, pollution and debt, the economy needs stable oil prices for a recovery. Despite holding the world’s largest shale gas reserves, the nation has remained dependent on imports because progress on extracting fuel trapped in rocks has belied expectations.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza