New Delhi: Oil prices slumped to their lowest since Jan, boosting profitability of gasoline advertising firms and creating sufficient headroom for a discount in pump charges — presumably forward of the Maharashtra and Haryana state polls.
Benchmark Brent crude, which has a bearing on India’s crude buy value, hit $73.6 on Wednesday, remaining close to the file low degree this yr seen after Tuesday’s 5% drop on heightened worries over tepid demand development, particularly in China.
Analysts mentioned prospects of oversupply brought on by Libyan provides returning to the market, the Opec+ grouping unwinding the voluntary manufacturing cut from Oct and rising output from sources exterior the grouping have been including to the downward stress on oil prices.
The decline in oil prices since Jan led to constructive advertising margins for the gasoline retailers, particularly the state-run entities who cater to 90% of the market. Govt took benefit by leaning on them to cut petrol and diesel prices by Rs 2 per litre on March 14, simply forward of the overall election.
Even after first discount in pump prices since May 2022, a Motilal Oswal Financial Services report in April had projected a gross advertising margin of greater than Rs 2 per litre in April when the Indian Basket, or the combination of crude processed by Indian refiners, averaged $89.4 per barrel. This would have swollen additional by now because the basket, which trails Brent by $2-4 per barrel, averaged $76 in Sept.
But the jury is out on whether or not the govt. would capitalise on the scenario by searching for one other cut in pump prices once more in view of analysts predicting oil price volatility. Projecting prices to stay risky within the near-term, monetary companies firm UBS guess on the oil market remaining under-supplied. Goldman Sachs too has forecast $70-85/barrel price vary.
Govt can be comfortably positioned even when the present low prices don’t final lengthy however degree out at $85, which can give it the leeway to ask the state-run retailers to maintain pump prices frozen ‘voluntarily’ as, what oil minister Hardeep Singh Puri describes as ‘good corporate citizens’ — as has been seen within the final three years.
