India's crude import basket at 10-month low but pump prices to remain high

Fear of worsening economic slowdown in China has dealt the latest blow to global crude oil, with daily prices falling to their lowest since January 4, 2022

The price of the Indian basket of crude oil has hit a 10-month low of $88.6 a barrel in November, government data showed.

However, officials say this may not translate into an immediate reduction in rates at pumps as state-owned retailers might need time to recoup losses incurred earlier.
 

Over the past few days, a fresh Covid-19 outbreak in China has compounded fears of economic slowdown intensifying in major economies. As a result Brent crude spot prices fell on Monday to their lowest since January 4, touching a low of $79.92 a barrel intraday. For India, every $1 per barrel dip in crude oil prices has an impact on its current account of about $1 billion.
 

However, petroleum ministry officials said oil marketing companies (OMCs) would need time to shore up earnings before retail pri¬ces can be reduced. “The governme¬nt has decided to take a long-term view of the issue because the OMCs had kept prices low earlier this year when global prices had risen. We also have to see whether the current trend line holds,” an official said.
 

Last month, Petroleum Minister Hardeep Singh Puri had said gasoline prices had risen 40 per cent till August in most developed nations, but India saw a 2 per cent decline thanks to government support.                 

OMCs such as Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation had a difficult September quarter, contending with high international crude and gas prices and low gross refining margins.
 

Pump prices were last revised downwards when the government cut excise duty on petrol and diesel in May.

Price relief
 

India, the world’s third-largest oil importer, has seen its crude oil import bill reduce in recent months. According to data from the Petroleum Planning and Analysis Cell, the cost of a barrel of imported crude has fallen 24 per cent from the peak of $116.01 a barrel in June.

Global prices had risen in the immediate aftermath of the Russian invasion of Ukraine. Despite increasing volatility, prices have been on a downward trajectory.

The Indian basket of crude oil represents a derived basket comprising sour grade (Oman & Dubai average) and sweet grade (Brent dated) of crude oil processed in Indian refineries in the ratio of 75:25 during 2019-20.

However, the Russian oil share in India’s import basket climbed to 22 per cent in October from just 1 per cent before the Ukraine war.