With global prices in free fall, the Indian basket of crude oils has again breached the psychological $50-mark this year, from levels of over $100, closing trade on Thursday at $49.11 a barrel of nearly 160 litres.
Particularly since global powers signed the historic nuclear deal with Iran last month, traders have worried that crude supply might exceed the demand.
The global oversupply is currently running at two million barrels a day, compared to 1.8 million during the first six months of the year, American investment firm Goldman Sachs said in a report on Thursday.
"The rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market," the report said.
"The risks remain substantially skewed to the downside," it added.
The US crude production added 52,000 barrels to 9.465 million barrels a day, according to its Energy Information Administration's (EIA) weekly report.
The West Texas Intermediate for September delivery moved down 49 cents to settle at $44.66 a barrel on the New York mercantile exchange.
Brent crude for September delivery was trading on Friday at $44.83, on course for its eighth consecutive week of decline.
The International Energy Agency has said Iran has at least 17 million barrels of crude oil stored and ready to be shipped.
The markets expected OPEC's crude production to hit a high in July. In June, OPEC production increased by 283,000 barrels per day to 31.38 million barrels per day, a three-year high, according to OPEC monthly oil market report on Monday.
The Reserve Bank of India (RBI) maintained its key interest rates on Tuesday, with Governor Raghuram Rajan saying the fall in oil prices has been very beneficial for the country.
One of the reasons for the strength of the Indian rupee is the falling price of oil which has brought down the current account deficit, he said.
Citing the recent twin-developments of US firm ConocoPhillips halting talks on developing a shale gas block in China and the country cutting its 2020 shale gas production target to a third of the original number, an energy expert said both these indicate that OPEC's refusal to cut oil production has finally achieved its goal of discouraging development of potential oil and gas resources.
"By keeping production high, they (OPEC) can push down prices, which will drive away new investments in oil and gas production, and eventually keep future oil and gas production down in the long-term," said Amit Bhandari, fellow at Gateway House.
"It is a continuation of a trend that has already started with global hydrocarbon majors such as ExxonMobil, BP, Shell, ConocoPhillips and Gazprom, among others, cutting down spending on exploration," he said.
Though low prices in the short-term are welcome, there is a flip side too for oil producers like Cairn India, which reported a 24 percent drop in net profit for the first quarter ended June, caused by the fall in crude prices.
"Oil and gas fields across the world, and the companies which own them, have lost value and can be bought cheap because of low oil prices," Bhandari said.
"Indian companies need to actively pursue this path and focus on acquiring oil fields and oil companies abroad in order to secure a stable and predictable supply of oil in the medium- and long-term as well," he added.
Bhandari said the drop in oil prices has so far benefited India, but any political change in the Gulf and Middle East could destabilise current equations.
"India can insulate its economy by diversifying energy supply sources and by buying stakes in global oil and gas fields, to guard against the unforeseen," he said.
