- OPEC announced output cut for crude oil from January 2017
- After OPEC announcement crude prices have shot up over 15%
- Analysts say that global oil prices could be headed even higher
OPEC produces a third of global oil. After the OPEC announcement, since then, Brent crude prices, the international benchmark for oil prices, shot up over 15 per cent to around $53 per barrel - their highest level in nearly 16 months.
Analysts say that global oil prices could be headed even higher in the short term. Tushar Bansal, director of Ivy Global Energy, said global oil rates could rise to $60 per barrel in the short term. And if there is a supply disruption in Libya or Nigeria, prices could shoot up to $65 per barrel, he adds.
Goldman Sachs said in a note after the OPEC agreement that it expects oil prices to average $55 per barrel in the first half of next year.
Petrol and diesel prices are deregulated in India, which means they are linked to market rates. Oil marketing companies revise their prices every fortnight, depending on global oil rates and the rupee's movement against dollar.
India imports more than three-fourth of its crude oil requirements. So apart from global oil prices, the value of the rupee as well as the margins of oil marketing companies and the various government levies determine the final price of petrol and diesel price in India.
Normally, state-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp and Hindustan Petroleum Corp revise rates of the fuel on a fortnightly basis based on the average oil price and foreign exchange rate in the preceding fortnight.
The Indian crude basket, which is a benchmark followed by the oil ministry, averaged around $45 in November. Indian crude basket is a weighted average of the prices of Oman and Dubai sour crude.
The prognosis for rupee is not encouraging either. Analysts expect the rupee to remain weak against dollar, which has hovered around 14-year highs against a basket of global currencies.
Shrikant Chouhan, technical analyst at Kotak Securities, expects the rupee to slide to around 70 against the US dollar over the next few weeks.