Opec impact: Pump prices may go up if global rates rise

A day after the Organization of the Petroleum Exporting Countries (Opec) and its partners, such as Russia, announced a cut in Opec+ crude oil output by 2 million barrels per day (bpd), analysts said they expect pump prices for fuel to go up soon in India.

- SUBHAYAN CHAKRABORTY

The production cut will lead to 2 percent of global oil supply going offline starting November. As a result, oil prices are headed for choppy waters ahead, analysts feel.

"The government had not raised retail prices of fuel for some time now, especially when retail prices in India were lower by 12-14 per litre as compared to international prices. As a result, most oil marketing companies (OMCs) posted a revenue loss in Q1 FY23. The OMCs will remove their losses before reducing prices further," Prashant Vasisht, vice-president and co-group head (corporate ratings) at rating agency ICRA, said.

He said the adverse base effect to inflation which began since August might also allow the government to = raise the pump prices. This view was supported by others.

"The government, including Petroleum and Natural Gas Minister Hardeep Singh Puri, has repeatedly stressed that OMC's need more time to recover from the losses they made earlier when global prices were high. We get a sense that pump prices are primed to go up," a senior economist from ratings agency Ind-Ra said.