Expect welcome news on fuel front

Expect welcome news on fuel front

In what could be a relief to those concerned over stock market crash and fall in rupee, the prices of petrol and diesel may come down further, come September.

Price of Indian basket of crude, as determined by the Petroleum planning and analysis cell (PPAC) under the Ministry of petroleum and natural gas has dropped from $50.68 a barrel, when the last price hike was effected, to $45.21 a barrel on August 21, the last day up to which the price would be considered.

This makes the average price to be considered for the next price revision, with effect from September 1, at $47.69 a barrel.

We expect much more cut in fuel prices during the forthcoming price revision than what was effected on the eve of Independence Day of around Rs 1.27 per litre for petrol while diesel rate was reduced by Rs 1.17 a litre,” Tushar Sen, president of West Bengal Petroleum Dealers’ Association, told dna.

But price revisions further may not be possible, analysts said.

In the domestic market, the government is not exactly bothered about tinkering with retail fuel prices, with low crude prices providing enough comfort.

With oil prices under pressure, political compulsions to regulate auto fuels will remain low, according to Rahul Dholam, senior research analyst at Angel Research.

“Studying the global marginal cost of producing oil against shale gas, we expect oil prices to remain near current levels. With supplies being able to meet incremental demand, pricing would depend upon at what costs oil can be produced. As per the cost curve, 80% of the production is happening at below $50. So, prices can’t deviate much from these levels,” Dholam told dna.

Globally, analysts point out resilient demand for oil in China, where crude imports have reached record levels, touching 7.4 million barrels a day in July from 1.7 million barrels a year back.

State of physical markets do not corroborate substantial weakness in oil prices, Adam Longson, head of commodity research at Morgan Stanley said in a report.

In fact, money managers and hedge funds have increased their bets on rising crude oil prices, with large speculators raising their net long holdings of Brent crude futures and options in the week to August 18 after four weeks of net sales, according to figures from InterContinental Exchange (ICE), a Reuters report said showing signs that some speculators think the oil market may be about to recover from current levels.



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