Due to intense competition among oil producing countries, Saudi Arabia cut crude oil prices for August by $ 11 per barrel, the biggest drop in the last 26 years. This discount on ‘Arab Light Crude’ has been given after the cut of $ 6 per barrel in July. This cut was made in July after the opening of the Strait of Hormuz, due to which oil prices came down to the level before February 28. According to Bloomberg report, the price of Saudi Arabia’s crude oil for Asia is $ 1.50 per barrel less than the Oman/Dubai average.
The major producing countries of the Persian Gulf are increasing production rapidly. Among these, Saudi Arabia’s exports have reached close to the pre-war level. The country is able to send its tankers via Hormuz. The United Arab Emirates – which left OPEC during the conflict – has also restored supplies. This step has been taken at a time when OPEC+ and its allies including Russia have agreed to increase the production target by 188,000 barrels per day from August. Earlier, a similar increase was made in June and July also.
Slight increase in the price of crude oil
Even though there was a decline in the prices of crude oil on Monday, there was an increase in it on Tuesday. Brent crude, the crude oil of Gulf countries, is trading at $ 72.26 per barrel with a rise of 0.36 percent. On the other hand, the price of American crude is trading at $ 68.85 per barrel with a rise of 0.44 percent. Despite this rise, crude oil prices remain at pre-war levels. There has been a decline of about 20 percent in the prices of crude oil in the month of June. Whereas in the month of July, the prices of crude oil were seen within the range only.
Will India benefit?
Low prices and increased supply are good news for India as refiners are trying to sell petrol and diesel below market prices and offset the ongoing losses on cooking gas cylinders. Apart from improving market sentiment, lower oil prices also mean that the government will be able to control its subsidy bill, which is likely to exceed the budget limit due to the loss in the first quarter of the current financial year.
While the central government has already shouldered over Rs 1.2 lakh crore through tax cuts and other support to oil marketing companies, it has budgeted only Rs 12,000 crore for LPG subsidy, which is likely to be at least three times less than the actual expenditure.
However, OMCs are unsure how the Center will offset at least a portion of their losses as they are facing losses in the June quarter and inventories are likely to be impacted by higher crude prices in the September quarter as well.
Lower oil and gas prices will also reduce energy costs for Indian companies, which will help keep prices and overall inflation under control. This was a major concern for India Inc., which feared that rising retail prices might lead consumers to postpone non-essential purchases.
Petrol and diesel prices in India
On the other hand, there has been no change in the prices of petrol and diesel in India. The last time any change was seen in the prices of petrol and diesel was on May 25. Then the prices of petrol and diesel were increased by the oil companies. If we look at the data, the price of petrol and diesel in Delhi is Rs 102.12 and Rs 95.20 per liter respectively.
The price of petrol in Kolkata is Rs 113.51 and the price of diesel is Rs 99.82 per liter. In Mumbai, the prices of petrol and diesel are seen at Rs 111.21 and Rs 97.83 per liter respectively. Whereas in Chennai the price of petrol has come to Rs 107.77 and diesel to Rs 99.55 per liter. However, in the month of May, there was an increase of 7 to 8 percent in fuel prices.
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