Oil marketing companies are unlikely to cut fuel prices as crude oil prices have jumped over 5 per cent this week alone due to the West Asia crisis, government officials have told Business Today TV.
Business Today had reported last month that oil marketing companies (OMC) were considering a fuel price cut ahead of assembly elections in Jammu & Kashmir and Haryana and the festival season. Brent crude oil prices were at a near three-year low, and top officials had said the government was mulling passing on some of the benefits of falling crude prices to retail consumers in the country.
However, not cuts have happened despite J&K completing polls and Haryana voting on Saturday. The holy Navratri period has also started, and Diwali is less than a month away. And, the much anticipated cut in prices of petrol and diesel has not materialised.
With the global supply situation changing considerably in the past week, it may not be the right time to cut prices right now, the official added.
The Ministry of Petroleum & Natural Gas and the Ministry of Finance are closely watching the global developments with the Prime Minister’s Office also on top of the situation. The past 10 days have upended all calculations in the North Block. Crude prices have shot up $7 per barrel in 7 days after Israel bombed a bunker in south Beirut killing 64-year old Hassan Nasrallah, the Hezbollah supremo. Prices of crude oil are still rising.
The Indian crude basket, which is a blend of several kinds of imports, also rose about $3 per barrel since September 27 to $75.22 on October 3. It however, remains considerably lower than $91.97 per barrel a year ago.
Officials further added the reason behind the hike in commercial LPG prices at the beginning of the month was because of the same reason that OMC margins were still not showing healthy recovery from the dip. OMCs had announced a Rs 48.50 hike in the price of 19 kg commercial liquefied petroleum gas (LPG) cylinders. The price of a five kilo free trade LPG cylinder has increased by Rs 12, but domestic LPG cylinders remain unaffected by this change.
Oil prices surged over five per cent this week with Brent crude nearing $75 a barrel, as traders evaluated supply risks in the Middle East amid escalating tensions following Iran's strikes against Israel and concerns over potential retaliatory actions. Goldman Sachs predicts a $20 per barrel oil price increase if Iran's oil supply drops due to conflict. OPEC+ spare capacity could offset some of the supply loss, potentially limiting the price rise.
Citigroup Inc. reports that a significant strike by Israel on Iran's oil-exporting capabilities could remove 1.5 million barrels of daily supply from the market.
Shares of oil marketing companies fell again on October 4 building up the losses of this week. Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum – the fall in these stocks deepened after December Brent crude oil futures contract on the Intercontinental Exchange rose over 8 per cent after Iran's missile attack on Israel.
US President Joe Biden on October 3 added to the anxiety in markets with his statement that America was in discussions with Israel to strike Iran's oil facilities.