Petrol, diesel prices may jump Rs 5-6 per litre due to Saudi Aramco drone strikes
BusinessToday.In September 17, 2019
Petrol and diesel prices may rise by Rs 5-6 per litre in next few days following a surge in international crude oil prices after drone attacks on the world's largest oil processing facility Aramco in Saudi Arabia last Saturday.
"We do not rule out the possibility of moderation in marketing margins on auto fuels - a $10/per barrel rise in global crude and product prices may require OMCs to increase the retail price of diesel and gasoline by Rs 5-6/litre in the following fortnight," said Kotak Securities in a research note to its clients.
The note further said that the oil prices will remain elevated in the near term, however, their moderation will hinge upon "full restoration of Saudi's production, which may at least take a few weeks."
"Any further escalation of geopolitical tensions in the middle-east region, which cannot be ruled out for now, may add to the woes of global oil supplies for now given lack of buffer from Saudi's significant spare production capacity," it added.
Besides, the surge in global crude prices may also put pressure on refining margins amid slowing demand, apart from increasing the absolute quantum of fuel and loss. On the other hand, higher crude prices may be construed positively for upstream PSUs and GAIL, the note further stated.
Indian fuel marketing companies fix the price of petrol and diesel at retail outlets based on an average of the last 15 days of the benchmark price of petrol and diesel in the Middle East.
On Monday, Brent crude price surged nearly 20% in intraday trading in response to the attacks, the biggest jump in almost 30 years. Oil price settled 14.6% higher at $69.02 a barrel, its biggest one-day percentage gain since 1988.
Given that India is the world's third-largest oil importer - we import over 80 per cent of our oil requirements - such a hike will inflate the import bill and disrupt the country's fiscal position. Currently, a litre of petrol is selling at Rs 71.89 in Delhi, Rs 77.57 in Mumbai, Rs 74.70 in Chennai, Rs 74.62 in Kolkata.