Fuel prices hit new lows on Thursday, with petrol falling to an eight-month low and diesel to a nearly four-month low on the back of falling global oil prices.
Petrol in Delhi cost ₹73.24 per litre following a 33 paise cut. Diesel cost ₹68.13 per litre following a 36 paise cut.
The Indian basket of crude oil has been on a downward trajectory for the last two months, coming in at $59.9 on Wednesday since its high of $85.2 a barrel on October 4.
“Fuel prices are a function of crude oil prices and the rupee-dollar parity,” K. Ravichandran, group head, Corporate Sector Ratings, ICRA, said. “The key thing to watch out for is the G20 summit and the December 6 meeting of OPEC.”
“But even if OPEC does resort to production cuts, oil prices can at best increase to $65-70,” Mr. Ravichandran added.
“Supply pressure is very much there because of record production levels in the U.S. and even Russia has been ramping up. The rupee has also stabilised at about ₹70 to a dollar; given these two factors, I don’t expect a major reversal in retail prices in the near term unless the government wants to increase excise duty after their cut in October,” he said.
The government, had in October, cut the excise duty on fuel by ₹1.5 per litre and asked the oil marketing companies to reduce their prices by an additional ₹1 per litre, taking the total impact on fuel prices to ₹2.5 per litre. This followed the October 4 high of fuel prices when petrol and diesel touched ₹84 and ₹75.45 per litre respectively. Sector analysts, however, say that it is impossible to gauge whether OMCs are now recovering that ₹1 per litre, with oil prices subdued.
The rupee exchange rate has also eased recently, in tandem with the fall in oil prices. From ₹73.9 a dollar as recently as October 16, the rupee is at ₹69.85, the first time it rose past the ₹70 mark in three months.
