NEW DELHI: Both international crude oil prices and domestic fuel rates have taken a breather from their relentless rise this week as the world’s most important oil suppliers cartel—Organisation of Petroleum Exporting Countries (OPEC) along with other members such as Russia—remained unable to reach a consensus on an extension of earlier production cuts.
These output cuts, made to keep prices from tanking due to the impact of the pandemic, are set to lapse in January 2021. However, with demand for crude oil still weak, several member countries of the OPEC+ alliance have been seeking an extension to keep prices high. According to experts, if further output cuts are agreed upon, then crude oil prices are likely to trend upwards.
On Tuesday, WTI crude traded marginally lower at $47 per barrel after OPEC+ members adjourned a video conference after the first day of deliberations on Monday ended without an agreement. The meeting scheduled for Tuesday has also been postponed to Thursday when members of the OPEC will meet with non-OPEC oil producers like Russia.
In India, Tuesday saw the second straight day without petrol or diesel price hikes. Over the ten days precending the halt, however, petrol prices have risen by Rs 1.28 per litre and diesel by Rs 1.96 a litre. If crude prices begin rising again, retail prices in India are likely to follow. According to analysts, oil exporters such as Russia and Saudi Arabia face a difficult situation since the pandemic has destroyed a large part of demand in the global economy.
However, their decision to protect prices through output cuts also forces them to keep volumes down and hitting extremely lucrative revenue from the oil sales. Most major oil exporters are heavily dependent on the commodity known as black gold for their fiscal requirements.
The outlook for demand, however, while improving, remains quite sluggish. While some economies such as the United States and Europe have been disrupted by a second wave of coronavirus infections, others such as China and other emerging economies in the region such have rebounded more strongly.