OPEC Plus cuts crude oil production: Petrol, diesel prices likely to rise in India

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Some of the world’s top oil producers are to cut production by two million barrels a day to spur a recovery in oil prices that have plunged to pre-war levels in Ukraine…

OPEC Plus, an alliance of the world’s crude oil exporting nations and their allies.OPEC+) decision to cut crude oil production is likely to increase petrol and diesel prices in India after the rise in international oil prices. Some of the world’s top oil producers agreed on Wednesday to cut output by two million barrels a day to spur a recovery in oil prices, which have fallen to pre-war levels in Ukraine. A fall in oil prices in recent weeks in India has helped reduce its import bill. At the same time, the losses incurred by state-owned fuel retailers in petrol and diesel sales have been limited. At this time OPEC decision will affect India.

Ahead of the OPEC+ decision, losses on diesel fell to ₹ 5 from a peak of ₹ 30 per liter as oil companies started making small profits on petrol, industry sources said. But losses on diesel will widen due to rising prices of crude oil refined to produce petrol, diesel and other products and weakening rupee against the US dollar. He said that the price of petrol will also increase.

India imports 85% of its oil requirements. International oil prices directly dictate domestic prices.

State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have adjusted retail prices of petrol and diesel in line with international costs for six months.

This price hike led to booking losses on fuel sales as oil prices rose to a peak of around $120 per barrel during the May/June period. A basket of crude oil imported by India on September 27 fell to $84.75 per barrel. But the rise in international oil prices after the OPEC+ decision led to a rise to $92.17 on October 5.

IOC, BPCL and HPCL shall revise the retail price of petrol and diesel daily as per cost. That rise ended on March 22 of this year. A mere fortnight before the new revision came into effect from April 7, the price has gone up by ₹10 per litre. Current petrol price in Delhi is ₹96.72 per liter and diesel is ₹89.62 per litre. It was down from ₹105.41 per liter for petrol and ₹96.67 for diesel on April 6 as the government cut excise duty to cool rates.

The ₹ 10 per liter hike implemented between March 22 and April 6 is not enough to cover the cost, sources said.

Oil companies did not revise rates to help the government manage inflation, which had already reached multi-year highs. If petrol and diesel prices were increased in line with cost, it would have gone up further.

Meanwhile, the government said pricing decisions will be taken by oil companies. Petroleum Minister Hardeep Singh Puri recently described state-owned fuel retailers as “good corporate citizens” for not raising prices. Russia’s invasion of Ukraine on February 24 sent shockwaves through global energy markets. Initial price hikes turned into sustained price hikes as the global community imposed sanctions on key Russian exports. Brent was at $90.21 per barrel before the attack. It then rose to a 14-year high.

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