No immediate consumer relief expected in petrol, diesel prices

Oil companies cautious over crude oil price fluctuations

Indian oil marketing companies are unlikely to provide immediate relief to consumers from high petrol and diesel prices. This, as the companies turned cautious about the recent developments that have pulled down crude oil prices and are waiting a bit longer to lower pump prices of auto fuels.

Petrol was sold at Rs 103.97 a litre while diesel retailed at Rs 86.67 a litre in the national capital on Saturday.

According to an analysis by a public sector undertaking oil marketing company, Brent crude oil prices remained largely range bound at $80-$82 per barrel during the month of November (till November 25).

“On Friday, November 26, prices fell by around $4 a barrel till Asian time stamp. However, subsequently after opening of US market, with the drastic sell off in Brent Futures, prices fell further by around $6 a barrel to close at $72.91 a barrel at Intercontinental Exchange Inc (ICE) London. This seems like a knee jerk reaction from fears that the new COVID-19 variant discovered in Southern Africa might dampen economic growth and trigger another demand slump,” the analysis stated.

“Earlier during the week, major oil consumers such as US, Japan and South Korea had announced releasing crude from their strategic reserves as part of a joint effort to reduce international crude oil prices. Even these announcements could not impact international prices much. However, renewed COVID-19 concerns have now brought about the desired objective,” it added, pointing out that crude oil prices have moderated.

But there is also a fear that these prices may not stay at lower levels for long. “Organization of the Petroleum Exporting Countries and its allies (OPEC+) might still have a say in this, with the group's scheduled meeting on and December 1st and 2nd potentially resulting in a reduction in production targets for 2022. Thus, international crude oil prices may recover again if OPEC+ announces slower than expected production rollout coming up,” the analysis further said.

Petrol and diesel prices in the country have remained unchanged from November 5, after the cut in excise duty on petrol by Rs 5 a litre, and on diesel by Rs 10 a litre was declared by the Finance Ministry as a form of Diwali cheer. This, after increasing clamour across country to give relief to consumers from record high auto fuel prices. Prices were lowered further as part of Value Added Tax rate revision by 27 states and union territories.

“Daily revision in retail prices of petrol and diesel are carried out by oil companies based on 15 days moving average prices in the international market. Accordingly, impact on international oil prices from announcement by OPEC+ and developments on the new COVID-19 variant will decide the near-term course of fuel prices in the country,” the analysis noted.