Following the announcement, crude has corrected from the recent highs of $77/barrel a week back to the current level of around $68/barrel.
The country’s crude oil import bill has increased 190.6% year-on-year to $24.7 billion in Q1FY22 with rising prices of the commodity in the international market and higher procurement volumes with demand for auto fuels returning. The volume of crude oil imported in the quarter, at 51 million tonne, was 14.7% higher than the same period last year. The average price of the Indian basket of crude oil in Q1FY22 was $68.6 per barrel, against the average rate of $30.4 per barrel recorded in Q1FY21.
The rise in crude prices was mainly supported by global demand recovery and voluntary production cuts until July end from major oil exporting nations. Global crude prices have started to come down after the Opec plus group, on Sunday, agreed to increase crude oil output by 0.4 million barrels per day from August to December end. Following the announcement, crude has corrected from the recent highs of $77/barrel a week back to the current level of around $68/barrel.
Owing to lower demand amid lockdowns to control the coronavirus pandemic, crude imports had dropped 12.7% annually to 198.1 MT in FY21, while the value of the imports fell at a much sharper rate of 32.2% to $62.7 billion as global crude prices remained largely muted throughout the first half of the fiscal. As much as 85% of the country’s requirement of crude oil is dependent on imports.
With rising crude prices, retail price of petrol crossed the Rs 100-mark in Delhi for the first time on July 7, as state-run oil marketing companies gradually increased the base price of the product. Petrol was being sold at Rs 101.84 per litre in the national capital on Wednesday while diesel was priced at Rs 89.87 per litre. Although global crude prices in the past have been higher than the current levels, the current record-high retail price is largely the impact of the Centre cumulatively increasing surcharge and cess on petrol by Rs 13/litre in March and May 2020.
In fact, when the price of the Indian basket of crude had crossed $80 per barrel in October 2018 in the run up to the legislative assembly elections of Chhattisgarh, Madhya Pradesh and Rajasthan, petrol and diesel were sold at around Rs 82 per litre and Rs 75 per litre. Analysts noted that even at current record-high prices, the marketing margin oil marketing companies (OMCs) is currently at only Rs 0.2 per litre for petrol and Rs 2.9 per litre for diesel. “If OMCs retain the benefit of the sharp correction in crude, we see normative margins on diesel at Rs 5.7 per litre and on gasoline (petrol) at Rs 3.5 per litre,” Jefferies said.