The government is reviewing the recent decline in international crude oil prices. If the downward rally continues, it will take a decision on reducing the retail prices of auto fuels, Secretary to the Ministry of Petroleum and Natural Gas, Pankaj Jain, said on Thursday.

Brent crude oil prices fell below $70 per barrel this week, which is the lowest since December 2021.

Speaking to reporters, Jain said that the oil marketing companies (OMCs) will consider a cut in retail prices if international prices of crude oil stays subdued for a longer duration.

“In the last 7-10 days, crude oil prices have come down. At present, the Ministry is analysing the prices and how long they will stay low. It would not be appropriate to cut (retail prices) by following the developments of just a week. We need time to analyse this trend for a longer duration,” he added.

On the delay in reaching a decision pertaining to production cuts by OPEC+ (Organisation of Petroleum Exporting Countries), Jain said that they will decide by December 2024. He underlined India’s preference for a growth in output amid rising demand.

On Windfall Tax, the Secretary said, “There is a calculation mechanism from the revenue department. We are in continuous discussions with the revenue department, which will take the final call..”

Oil prices to normalise soon

On September 10, the US EIA (Energy Information Administration) said, “Despite a drop in the Brent crude oil spot price to $73 per barrel on September 6, we expect ongoing withdrawals from global oil inventories will push prices back above $80 per barrel this month.”

Those increases had been set to start in October.

Amid OPEC+ announcing a delay in its plan to increase production till December, countries may utilise oil, more than what the US EIA anticipated, from the inventories in the fourth quarter of 2024. This increase in production was supposed to start in October.

“Although market concerns over economic and oil demand growth, particularly in China, have increased, causing oil prices to fall, OPEC+ production cuts mean less oil is being produced globally than is being consumed. We expect the Brent crude oil spot price to average $82 per barrel in Q4 2024 and average $84 in 2025,” it added.

PL Capital-Prabhudas Lilladher in a commentary on Thursday said that recent global developments, leading to ample supplies amid weaker demand prospects, have pushed Brent oil prices to lows of around $71 per barrel.

“Last week, reports of resolution of a dispute that had halted Libyan crude supply led to Brent falling to around $71 per barrel owing to ample supplies amid a weak demand outlook. As per Wood Mackenzie, marginal cost of production at fag end of the cost curve is upwards of $70. Thus, oil prices are not expected to remain below $70 per barrel for long,” it added.

While upstream earnings are currently impacted, with the OPEC+ delaying its planned rise in production, it expects oil prices to rebound to $75-80 a barrel in the near term.

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