Petrol Price Hits Two-Year High Of Rs 83 A Litre, Diesel At Rs 73.32
Taxi drivers sit in front of a diesel and petrol gas pump at a Bharat Petroleum Corp. gas station in Mumbai, India. (Photographer: Vivek Prakash/Bloomberg)

Petrol Price Hits Two-Year High Of Rs 83 A Litre, Diesel At Rs 73.32

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Petrol price on Saturday breached the Rs 83-per-litre-mark in Delhi for the first time in more than two years after a rally in international oil prices forced a thirteenth increase in rates in the last fortnight.

That comes after petrol price was raised by 27 paise per litre and diesel by 25 paise on Saturday, according to a price notification issued by the oil marketing companies.

Petrol price in Delhi rose to Rs 83.13 per litre from Rs 82.86, while diesel rates went up from Rs 73.07 to Rs 73.32 per litre.

This is the highest rate for petrol and diesel since September 2018 and followed the 13th increase in rates since Nov. 20 when oil companies resumed daily price revision after nearly a two-month hiatus.

In 16 days, the petrol price has gone up by Rs 2.07 a litre and diesel rate has risen by Rs 2.86.

ICICI Securities said vaccine hopes are driving oil prices up.

The price of Brent crude oil is up 34% from lows that it hit at the end of October 2020 driven by hope that Covid-19 vaccines would lead to demand recovery.

The oil price surge is despite a second wave of Covid in Europe and the U.S., which has led to demand recovery reversal, and surge in Libyan oil output from 0.1 million barrels per day to 1.25 million bpd, it said.

Oil cartel OPEC plus its allies like Russia decided to raise output from January 2021 more modestly than earlier agreed is likely to ensure global supply deficit even in the first quarter of 2021. Thus, OPEC+ has done its part to prevent supply surplus until the vaccine boosts demand, it added.

Brent has risen from $36.9 per barrel on Oct. 30 to $49.5 on Dec. 4.

IEA estimates the global oil supply deficit ranged between 2.1 and 2.8 million bpd in third and fourth quarter of 2020. However, a surplus of 0.4 million was likely in first quarter of 2021 if OPEC+, as agreed in April 2020, was to prune output from 7.7 million bpd to 5.8 million bpd from January.

"However, we now estimate supply deficit of 0.5 million bpd in Q1 2021 and 0.2-2.8 million bpd in Q2-Q4 as OPEC+ has decided to raise output by just 0.5 million bpd in January 2021 and by not more than 0.5 million bpd in later months and only after deliberations," ICICI Securities said.

Prior to the Nov. 20 hike in rates in India, petrol prices had been static since Sep. 22 and diesel rates haven’t changed since Oct. 2.

Public sector oil marketing companies — Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. — revise rates of petrol and diesel daily based on benchmark international oil price and foreign exchange rate.

They had, however, resorted to calibrating the rates since the pandemic broke out with a view to avoiding volatility in retail prices.

The 58-day hiatus in petrol price revision and 48-day status quo on diesel rates were preceded by no change in rates between Jun. 30 and Aug. 15 and an 85-day status quo between March 17 and June 6.

In Mumbai, the petrol price on Friday was raised to Rs 89.78 per litre from Rs 89.52, while diesel rates went up from Rs 79.66 to Rs 79.93. Rates vary from state to state depending on the incidence of local sales tax or value added tax.

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