NEW DELHI: Worries over high fuel prices following drone attacks on Saudi Arabia’s largest crude processing facility last month have been shrugged aside, with brent crude prices falling well below pre-attack levels over the past few days. Oil sector analysts now say that weakening demand in the face of a slowing world economy could see prices fall even lower, unless tensions escalate further in West Asia or trade talks between the US and China produce positive results.
According to crude market data, brent (which forms a large majority of the Indian crude basket), was trading at $56.6 per barrel as of 8 pm IST on Thursday. This is a sharp fall 18 per cent fall from the $69 per barrel it had hit on September 16 following the attack which took nearly 5 per cent of total global crude production out of commission.
While crude prices had surged as much as 20 per cent in a single day following the attacks, the rapid restoration of affected production capacity by Saudi’s Aramco, combined with steadilyy weakening global growth prospects, have reversed the spike.
Retail prices of petrol and diesel in India had also steadily risen in the days following the attack, from a litre of petrol costing Rs 72.03 in New Delhi on September 16 to Rs 74.61 per litre on October 2. “With crude prices falling now, so will petrol and diesel rates after a lag of around a week,” a senior OMC official said.
In fact, crude prices have fallen at a much faster pace over the first three days of October after senior Saudi officials including energy minister Abdulaziz bin Salman and Ibrahim Al-Buainain, CEO of Aramco’s trading arm, announced that production is now back at pre-attack levels of 11.3 million barrels per day.
“Now that the Saudis have said production is effectively back at pre-attack levels, there is not much risk of high oil prices due to supply shortages. Weak global growth prospects and any escalation in already high trade tensions between the US and China may actually pull prices even below their current levels,” noted another oil PSU executive.