Crude trading below $80 a barrel — would this impact your fuel bill?

However, with conflict in the Middle East abating somewhat,  and weak demand from China, crude prices slumped below $80 per barrel in late July. On July 23, crude settled at $78.98, and currently trades around $76 per barrel .

Last month, Asia's crude imports fell to the lowest level in two years due to weak demand in China and other countries. China's crude imports fell 3.1 percent year-on-year to 10 million barrels per day (bpd).

What are the positive drivers for oil prices?

Though trading below $80 a barrel, on August 9, oil prices gained over 3.5 percent on-week  amid lower crude inventory in the US, and positive economic data from the US and some European countries. Iran's decision to retaliate against Israel for the killing of the Hamas leader also supported prices, as did hints of an interest rate cut by the US Fed.

Restrictions on oil supply by the Organisation of Petroleum Exporting Countries and its allies (or OPEC+) also supported crude prices. The group had decided on June 2 to continue the voluntary cuts of 2.2 million bpd till September 2024. Thereafter, the Saudi-led oil cartel plans to phase out the supply cuts over a year, by September 2025, in a monthly exercise. OPEC, however, said the monthly increase in production after September 2024 could be paused or reversed based on market conditions.

What could be the impact on India?

India imports around 87 percent of its crude, which makes it  highly sensitive to  movements in international oil prices.

Petrol and diesel prices in India are calculated based on global crude prices by the oil marketing companies (OMCs). However, ever since war broke out between Russia and Ukraine in 2022, the OMCs have broadly kept domestic fuel prices unchanged to protect consumers from high crude prices. Of late, they've held retail prices steady in order to recoup past losses and amid volatility arising from geopolitical tensions.

In the first quarter of FY25, public sector OMCs saw a sharp decline in their net profit after reporting record-high earnings in the previous quarters. The fall in profits  came amid weak gross refining margins (GRMs) and under-recovery on sale of LPG.

Whither, fuel price cut?

Minister of Petroleum and Natural Gas Hardeep Singh Puri, on June 11, had told reporters that slashing domestic petrol and diesel prices could be considered if crude oil prices sustain around $80 a barrel over a sustained period.

In the national capital, petrol is being sold at Rs 94.72 per litre. With crude prices hovering below $80 per barrel, can consumers expect some respite from high fuel prices?