Petrol and diesel prices have fallen on February 9th, as the Brent crude oil price fell below $65 per barrel after Iran announced to increase its oil production over the next four years. As a result, the diesel and petrol price today were cut by 2 paise and 4 paise respectively. Further, oil prices fell due to the increased U.S. crude supply, along with technical indicators signaling the potential for further price declines.
Meanwhile, the petrol and diesel prices were rising due to high crude oil prices, which in the mid-January had touched $70 per barrel mark as there were fears of the production cut by OPEC and non-members led by Russia.
Increased US Oil Supply
According to Energy Information Administration data, U.S. crude production rose to an all-time weekly high of 10.25 million barrels a day last week. After that the government has projected, that American daily output will cross 11 million in November, which is a year earlier than previously expected. The weekly U.S. output figure is currently higher than the 10 million barrels Saudi Arabia had produced on a daily basis last month. Further, the significant rebound in Lower 48 production is putting the pressure on the market
Other Oil Market Developments
- The North Sea’s Forties Pipeline System, which is one of the world’s most important crude oil supplier has resumed the operations overnight after a short halt.
- Gasoline futures fell lower for a sixth session to settle at $1.765 a gallon, which is the lowest since early January.
- Mexico is working on a pilot auction for shale fields later this year
- The U.S. has planned to sell half of its emergency oil reserves to help pay its bills, which was the hedge against supply disruptions.
Oil Prices Becomes Headache for Modi Government
Due to global rise of oil price, the fuel prices in India were rising since October 2017 when the government cut the excise duty by Rs 2 per litre. After that, till early February 2018 the Brent crude oil price rose over $13 per barrel, and subsequently, the petrol and diesel prices were also up Rs 5 and Rs 7 per litre respectively.
However, at present situation, when the oil is around seven weeks low, the government cannot go for the excise duty cut due to the present fiscal situation.
Today, the oil company HPCL announced its Q3 results, which showed 23% increase in the bottomline to Rs1,950 crore in the December 2017 quarter from Rs1590 crore a year ago, due to the better margins on refining and sales. This also shows that the government is unlikely to take steps in cutting the excise duty.
Overall, the fall in Brent crude price will not force the government to take any significant steps to reduce the diesel and petrol prices. Government will expect the crude oil prices to fall further in order to loosen the pressure of inflation.