With speculations that crude oil prices may go up again after Qatar deciding to pull out of the oil cartel Opec and an expected supply cut this week, Hindustan Petroleum Corporation (HPCL) Chairman and Managing Director M K Surana on Monday said that while the prices may go up, they will still be below $70 a barrel for the rest of the current financial year.
This comes after the Brent crude prices increased by 2.76 per cent to $62.22 a barrel at one point on Monday, arresting the recent declining trend. "The exit of Qatar is depending on the individual interests of the country. Despite all the geo-political situations, prices will still be below $70 a barrel for the rest of this financial year," Surana told Business Standard. This comes close to the statement by Qatar Energy Minister Saad al-Kaabi that his country will be exiting the Organization of Petroleum Exporting Countries (Opec) by January 1, 2019, to focus on gas production.
Moreover, an Opec meeting scheduled to take place this week is expected to come up with a supply cut to arrest the drop in prices. "The sharp slump in crude prices over the past few weeks amid fears of oversupply may reverse gradually, if Opec is able to pull off a production cut of around 1-1.5 million barrels per day in its upcoming meet next week, which we believe will be adequate to balance the market in CY2019," said a report by Kotak Institutional Equities. It added that the supply surplus may also taper off on the plausible imposition of full sanctions on Iran's crude exports by the US government from early-May 2019.
There were also reports that the move by Qatar may be because of the economic boycott that Doha has faced from countries such as Saudi Arabia from June 2017, citing that the country is backing terrorism and its regional rival Iran. Qatar has been a member of the oil group since 1961. The recent decline in prices was owing to an increase in production by countries such as Saudi Arabia and Russia, growth in shale oil production from the United States and waivers given by the US on the import of crude oil from Iran for eight countries, including India, for a period of 180 days from November 5. Since October 5, Brent crude prices have dropped by 26.9 per cent from $85.12 a barrel to around $62 a barrel at present.
The rise in crude oil prices above $80 a barrel in October had forced the central government to cut excise duty by Rs 1.5 a litre, while oil marketing companies absorbed Rs 1 a litre to give relief to retail prices on petrol and diesel for consumers. When asked whether the companies will be rolling back this absorption of prices on its marketing margin, an OMC official said that the calculation of marketing margin is a complex formula as today's prices will be based on crude oil prices weeks ago.