The government is reviewing the recent fall in international crude oil prices and will take a decision to reduce retail prices of auto fuel if the fall in crude oil prices continues, Secretary Ministry of Petroleum and Natural Gas Pankaj Jain said on Thursday.
Brent crude prices fell below $70 a barrel this week, their lowest since December 2021.
Jain told reporters here that if international crude oil prices remain low for an extended period, oil marketing companies (OMCs) would consider reducing retail prices.
“Crude oil prices have fallen over the last seven to 10 days. Now the ministry is analysing the prices and how long they will remain low. It would not be appropriate to reduce (retail prices) based on just one week’s trend. Time is needed to analyse the trend over a longer period,” he added.
On the delay in taking a decision on production cuts by OPEC+ (Organization of the Petroleum Exporting Countries), Jain said a decision would be taken by December 2024. He stressed that India’s priority is to increase production amid rising demand.
Regarding the temporary tax increase, the Chief Secretary said, “There is a calculation mechanism by the Revenue Department. We are in continuous discussion with the Revenue Department and the final decision will be taken by the department.”
Oil prices will soon normalize
On September 10, the U.S. Energy Information Administration (EIA) said, “Despite the decline in Brent crude spot prices to $73 per barrel on September 6, continuing withdrawals from global crude oil inventories are expected to drive prices above $80 per barrel this month.”
These price increases were scheduled to begin in October.
Countries may draw on more oil from fourth-quarter 2024 inventories than the EIA forecast after OPEC+ said it was delaying plans to increase production until December. The increase was supposed to begin in October.
“Oil prices have fallen amid growing market concerns about economic and oil demand growth, particularly in China, while OPEC+ production cuts mean global oil production is below consumption. We expect Brent crude spot prices to average $82 a barrel in the fourth quarter of 2024 and $84 in 2025,” it added.
Recent global events have led to a supply glut amid a weakening demand outlook, pushing Brent crude prices to a low of around $71 a barrel, PL Capital Prabhudas Lilladher said in a commentary on Thursday.
“Following reports last week of a resolution to the conflict that had cut off Libyan oil supplies, Brent crude prices fell to around $71 per barrel due to abundant supplies amid a weak demand outlook. According to Wood Mackenzie, the marginal cost of production at the end of the cost curve is above $70. Therefore, we do not expect oil prices to remain below $70 per barrel for long,” he added.
While upstream revenues are currently affected by OPEC+ delaying plans to increase production, we expect oil prices to recover to $75-80 per barrel in the near future.
