Economy

Fuel Prices likely to get cheaper in India as crude oil prices dip

According to the persons, who asked to remain anonymous, international oil prices are projected to decrease further due to demand worries related to Omicron, which has been designated as a “variant of concern” by the World Health Organization and the European Centre for Disease Prevention and Control.

He, on the other hand, underestimated the impact of countries releasing oil from strategic reserves to boost supplies. “These pronouncements are unlikely to have a significant impact on international prices.” “However, repeated Covid-19 worries have now resulted in the achievement of the desired goal,” he stated.

For the first time, major oil consumers – the United States, China, India, Japan, and South Korea – responded to the cartel’s supply pressure by announcing a coordinated release of additional oil from their individual stockpiles to bring down soaring oil prices. On November 23, India joined a consumer coalition fighting the cartel, the Organisation of Petroleum Exporting Countries (OPEC) and its supporters, collectively known as OPEC+, for artificially controlling output.

Indian fuel dealers are concerned that the cartel, which meets on December 2, may reduce supplies to stem price declines. “If OPEC+ announces a slower than planned production rollout coming up,” the second person said, “international crude oil prices may recover again.”

When international oil prices fell below $20 per barrel in April 2020 as a result of global lockdowns due to the Covid-19 outbreak, the producers’ cartel decided to limit output. To combat decreasing crude oil prices, OPEC-plus announced an unprecedented 9.7 million barrel per day output cut on April 12.

Despite increased demand, the grouping failed to restore supplies, causing worldwide oil prices to skyrocket. Crude oil prices hit $85 per barrel in early November, leading the central government to lower excise duty on gasoline by $5 per litre and diesel by $10 per litre to help customers.

Despite the fact that oil marketers claim to modify fuel pricing daily to reflect international market dynamics, they have not done so in the last 24 days. Since November 4, when the central excise tax was lowered, the price of petrol in Delhi has remained consistent at 103.97 per litre and the price of diesel has been stable at 86.67 per litre.

With over 90% market share in India’s retail petroleum sector, the three state-run marketers have a virtual monopoly. Emailed inquiries to the petroleum ministry and the three state-run oil companies – Indian Oil Corporation, Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd – went unanswered.

“Price reductions may not be as steep as Brent and WTI rate declines because only around 30% of crude OMCs purchase from the spot market, with the remaining 70% based on long-term contracts,” the first person explained.

Long-term crude oil contracts are affected by fluctuations in international benchmarks such as Brent, as term contracts are also connected to benchmark prices, according to a third source.

India is the world’s third-largest importer of crude oil, importing around 85 percent of the crude it processes. In the Covid-free year of 2019-20, the country bought 227 million tonnes of crude oil worth $101.4 billion.

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