Oil drops below $40 after 11 years

International crude oil prices plunged to fresh lows with the price of the Organisation of Petroleum Exporting Countries (OPEC) basket of twelve crudes going below the $40 a barrel level for the first time in 11 years.

The new OPEC reference basket of 12 crude oils closed at $39.21 a barrel on the previous trading day on Friday, the organisation's secretariat said. On Thursday, the price stood at $40.21. The last time it fell to $39 was in 2004.

Oil prices have been under pressure for several months due to concerns over oversupply, but the slump has deepened in the recent period.

Crude-oil production has remained robust despite the large drop in prices in the last year, as US producers continue to cut costs and members of the Organization of the Petroleum Exporting Countries continue to produce at full tilt.

The Indian basket, comprising 73 percent sour-grade Dubai and Oman crude, and the balance in sweet-grade Brent, plunged to $41.39 on Friday.

Meanwhile, state-run Indian Oil Corp on Sunday announced a hike in the price of petrol by 36 paise a litre and of diesel by 87 paise at Delhi, effective Monday.

"The current level of international product prices of petrol and diesel and INR-USD exchange rate warrant an increase in prices, the impact of which is being passed on to the consumers with this price revision," Indian Oil said in a statement here.

Tamil Nadu Chief Minister J. Jayalalithaa on Monday termed the reason for fuel price hike as unjustifiable when there is no change in the international price of crude oil.

While the latest fuel hike was part of the routine fortnightly price revision exercise by oil marketing companies, it should be considered that the Indian basket price in the preceding fortnight ranged between $44-46 a barrel.

The latest drop in global prices could possibly be reflected in the next fortnight's price revision.