Why Fuel Prices May Not Be Cut In Near Future

There is news for those who are paying more for petrol & diesel since 16th March. The oil producers are meeting in Doha in April and may take a step which may end the possibility of a downward revision in the prices of petrol & diesel in the near future.

Oil companies revised the prices of petrol & diesel on 16th March, one day after the usual day of monthly revision.

Indian Oil Corporation revises the petrol & diesel prices every fortnight. This time on 16th, diesel price was hiked by Rs 1.9 per litre and petrol price was raised by Rs 3.07 per litre as the crude oil prices in the international market have gone up by over 50% from the lows in February.

To consider a freeze in the oil output which may bring some balance in the supply and demand scenario, OPEC & non OPEC producers are meeting on April 17. Experts say that it is the sentiment which is driving the oil prices higher, and not any change in fundamentals. Vandana Hari, Editorial Director at Platts told NDTV that, ''it is just the sentiment which is driving the crude oil prices higher, fundamentally nothing has changed''. This would mean that the rally in oil prices may continue at least till April 17, which means 2 more possible hikes in petrol & diesel prices here for the consumers in India.

Crude oil prices today crossed $40 per barrel. WTI Crude is at $40 per barrel and Brent is above $41 per barrel.

Oil producers are aiming for a production freeze in April in the Doha meet which will be good economics for the world, but may not be a good news for Indian domestic consumers. If this happens, it would be the first deal on global oil supply in 15 years. But experts believe that it is actually a production cut and not the freeze which is the need of the hour.

Vandana Hari said that ''Output freeze is much ado about nothing, it won't help, there is a 1.5-2 million barrels per day of over supply that needs to be cut''. However for the moment it doesn't look if a production cut at all is on the table for the meeting in Doha.

Platts says that there is a need to cut at least dollar 2million barrels per day.

While the crude oil prices have been on fire in last few weeks, Platts is expecting crude to test new lows as well as the pick-up in demand is not very strong and there is an expectation of a fall in US Production as well this year. ''Crude may fall to dollar 20 per barrel'', according to Vandana Hari. However, she added that market equilibrium is expected at dollar 40-$50 per barrel. The equilibrium is likely to start mid 2017 and stay till 2020, prior to which oil prices can be expected to stay slippery.