Will Petrol, Diesel Become Cheaper? Oil Prices Go Down Despite OPEC Production Cut
Citing the ongoing lockdown worldwide due to Coronavirus pandemic oil producers have decided to cut down the global oil output in line with the reduced demand. The move however has failed to reciprocate in price hikes of crude oil across the globe. On Monday prices stood around $31 a barrel with a 2 percent reduction than before.
Citing the ongoing lockdown worldwide due to Coronavirus pandemic, oil producers have decided to cut down the global oil output in line with the reduced demand. The move, however, has failed to reciprocate in price hikes of crude oil across the globe.
On Monday, prices of crude oil stood around $31 a barrel with a 2 percent reduction than before. The move was a part of a deal brokered by US President Donald Trump between Twenty-four countries, led by Saudi Arabia and Russia, also referred to as Opec+.
The conglomerate had agreed on Sunday to reduce output by 9.7 million barrels per day. The number measures about 10 percent reduction than the regular for the month May-June. In addition, the key crude oil producers will also be reducing the outputs by lower amounts until April 2022.
The deal formed a part of a decision to revive the falling crude oil prices, especially for the producers in the US. The prices had been fighting a losing battle against a combination of the Coronavirus pandemic and Saudi-Russia rivalry.
(Representative Image: BCCL)
As per analysts, the production cut is way less than the drop in global oil demand, that currently stands at 30 percent. A large inventory has built-up already that will be a major roadblock in permitting the oil prices to rise.
What can help?
As per an ET report, prices of crude oil have already risen about $9 a barrel in the month of April. The price surge came under the anticipation of the supply cut deal. The increase now seems to have flatlined though.
A further rise in the prices can only be expected as and when the countries start easing the lockdown, which will in turn increase the demand of the crude oil in several nations.
Another move that can help is a reduction in output by producers in the US, Canada or other countries that are not part of the producers¡¯ cartel or Opec+.
(Representative Image: BCCL)
What can India expect?
With the lower prices of crude oil in the past months, negligible to none of the benefits were passed on to the consumers as petrol and diesel prices stood the same across the country. That being said, the increased tax levied on the crude oil at a time when it is cheaper than usual will help the government raise much needed funds at such a critical time.
The effect, however, can only be realised as and when the nationwide lockdown ends and the demand for petrol and diesel re-surge to normal.
