The price of the Indian oil basket dropped below $100 a barrel on Friday for the first time since March 6, as global crude prices cooled by 11% over the past week. This decline comes amid reports that the US and Iran may have reached a deal, potentially reopening the Strait of Hormuz for smooth movement of shipments.
Crude Price Decline Details
The cost of crude for Indian refiners fell to $97.52 a barrel on Friday, while the global benchmark Brent crude dropped to $91.12 a barrel. The recent cooling in crude prices is expected to reduce input costs for refiners, but it may not fully eliminate under-recoveries on petrol, diesel, and LPG, which are currently estimated at Rs 550 crore per day.
Impact of Rupee Depreciation
The sharp depreciation of the Indian rupee against the US dollar is likely to eat up some of the gains from lower crude prices. This means that despite the drop in international oil prices, consumers may not see a significant reduction in fuel prices at the pump.
Background: West Asia Conflict and Oil Prices
The war in West Asia had disrupted the key energy route linking the region with global markets, squeezing oil and gas supplies. As a result, the Indian oil basket rose sharply from an average of $69 a barrel in February to $114.5 in April. In May, the basket is averaging $106.83 a barrel, reflecting the volatility in global oil markets.
The potential US-Iran deal and reopening of the Strait of Hormuz could further stabilize oil prices, but the situation remains fluid. Indian refiners and policymakers will be closely monitoring developments to assess the impact on the economy and fuel prices.
