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Recent surge in crude oil prices in the international market and likely impact on retail prices in India

New Delhi: Crude oil prices in the international market rose to six-week high lately, as US oil production remained slow to return after hurricane Ida slammed into the US Gulf Coast during August last week. The optimism about global economic growth despite the Covid pandemic along with more than anticipated fall in US crude oil inventories have further bolstered the crude oil market sentiment. Brent crude oil futures on ICE had closed at $75.31/bbl on Friday, 17th September. 

The crude oil prices have recovered from the decline in August (till 20th August) as concerns about oil demand in Asia-Pacific region eased and oil demand in the US and Europe continued to show signs of strength. With easing of travel restrictions supported by seasonal strength in transportation fuels and increasing preference for personal mode of transportation, global demand for crude oil has increased significantly. In India, Petrol sales during August 2021 have exceeded even the pre-pandemic sales level prevailing during August 2019. Although Diesel sales are slightly lower than projected, numbers are expected to pick up by the festive season.

Global crude oil output is poised to rise in the coming months after OPEC+ agreed a new deal to unwind its remaining curbs. Despite that, global demand is expected to outpace supply during the year due to which international oil prices will likely remain firm in the near to mid-term.

Retail prices of Petrol and Diesel in India are also likely to be affected with the surge in international oil prices. During the last ten days itself, international crude oil prices have increased by around $3/bbl. However, no increase in the retail prices of Petrol and Diesel have been carried out by OMCs yet. In case international crude oil prices continue to remain at such high levels, increase in retail prices going forward will be inevitable.

RSP of Petrol and Diesel were last increased on 17th July and 15th July respectively. Earlier, RSP of both products had been decreased by Rs 0.65/litre and Rs 1.25/litre at Delhi market from 18th July onwards to pass on the decrease in international prices. The current RSP of Petrol and Diesel at Delhi market are Rs 101.19/litre and Rs 88.62/litre respectively.