Inflation and Oil Subsidy are two difficult and complex subjects that Modi Govt will have to deal with in next few months. With El Nino and bad monsoon threat, the last thing Modi Govt wants is higher crude oil prices but it seems that's precisely what's going to happen.
Here's the Brent Crude Oil Chart
As you can see in the chart above: Brent Crude has broken out of the triangle this week because of conflict in Iraq. That's not all - Technically, it has bounced from 200 week ma and after long time, it has seen expansion in volatility. All this means, Crude is headed higher atleast towards $125.
Fundamentally, experts believe that conflict in Iraq is serious supply disruption. Iraq is responsible for 3 million barrels a day of crude oil supply. The issue is not Iraq but what would unstable Iraq do to the whole Middle East region. Well, we don't know what will happen. One can hope that this is a false breakout and Oil then sells off leading to downside breakout. But then that will be hope as of now. Chart clearly suggests a strong upside move
The issue is how Modi Govt will deal with Oil subsidy issue if price spike of this nature happens along with bad monsoon.
Recent Post on June 04: Brent Crude is ready for big move
The blogpost is purely for educational purpose.