OIL FALL, BITTERSWEET TASTE FOR REFINERS

But plunge in crude levels this week to near three-year lows will come as a relief to a government which is boosting spending on welfare and infra

- S DINAKAR

A sharp fall in global crude benchmarks will reduce costs of fuel, both oil and gas, to Indian consumers if State-run oil companies choose to pass them on.

Alternatively, it will help Indian Oil, Bharat Petroleum and Hindustan Petroleum boost profitability at the pump even as the margins from processing crude into fuels decline.

The plunge in crude oil levels to near three-year lows this week at $70/bbl, a $20/bbl decline in five months, will also come as a relief to a government which is boosting spending on welfare and infrastructure.

"Low oil prices can help lift the burden on the import bill of India, in line with the budgetary aim to reduce the Centre's fiscal deficit to 5.1 per cent of GDP in FY25 from 5.6 per cent in the previous financial year," said Sourav Mitra, senior practice leader and director consulting, CRISIL Market Intelligence and Analytics.

Crude oil futures dipped to the lowest this week in nearly three years, wiping out all the gains made earlier this year after seasonal demand for crude from China did not materialise as expected.

Traders cut their net long position - the difference between bullish and bearish bets to the lowest level in the week to September 3 since exchanges began compiling such data in 2011, Oilprice.​com reported, citing exchanges' data.

US bank Goldman Sachs revised its forecast downward for 2025 by $5/bbl to an average $77/bbl, and Morgan Stanley predicted $75-$78/bbl, with both expecting that the crude market will be oversupplied and see prices leaning lower over 12 months.

"We have seen crude above $90/bbl in April and now close to $70/bbl," said Bhanu Patni, associate director, India Ratings and Research. "To arrest the decline, we could see some production cuts from Opec+ as was done in the past," Patni added.