Research firm CRISIL on Tuesday expected a 5-8% rise in petrol prices and 6-8% in that of diesel over the next 3-4 months after last Wednesday’s decision by the Organization of Petroleum Exporting Countries (Opec) to cut crude oil production by 1.2 million barrels per day (mpbd).
As per the firm’s research, new petrol prices in Mumbai could top Rs 75 per litre compared with Rs 72 now, and diesel more than Rs 64 compared with Rs 60 now.
A press release by CIRISIL said that the price of Brent crude could increase to $50-55 per barrel by March 2017 following Opec’s move, and if it touches to $60 as some expect, the price of petrol could touch Rs 80 and diesel Rs 68 per.
The research comes after OPEC’s last week decision to cut crude production by 1.2 million barrels a day.
A production cut always lifts prices, but the success of the Opec agreement depends on adherence. Previously, there have been instances of members breaking away from the cartel because of domestic compulsions, the report noted.
On domestic demand scenario, the report expects the demonetization and the consequent reduction in economic growth to curb usage, but things would rebound once currency in circulation reverts to normalcy.
Globally, oversupply is estimated at 1.4-1.7 mbpd at present, which means the Opec production cut would balance out demand and supply in the second half of 2017. What will also curb a massive spike in crude prices to above USD 50, many shale producers in the US become viable once again.
Shale oil output from many reserves like the Bakken Field in North Dakota and Permian and Eagle Ford in Texas become profitable if crude prices are at USD 50-55.
WITH PTI INPUTS