NEW DELHI: Global oil price continued their rally to jump past $81 per barrel on Monday – the highest since Aug 2024 – on fear of latest US shipping sanctions impeding flow of Russian barrels, leading to a scramble for Middle-East/US crude and tankers.
The rally is bound to put fuel retailers back in the wait-and-watch mode, dashing hopes of a fuel price cut as costlier crude and the weakening rupee erode margins. Expectations of a reduction in petrol and diesel prices had grown on reports of their profit rising to Rs 12 and Rs 10 per litre, respectively, on muted oil prices since Oct.
Shares of the three state-run fuel retailers, which serve about 90% of the market, slipped. Market leader IndianOil and Hindustan Petroleum scrips fell over 6%, while Bharat Petroleum dropped more than 4% on the NSE. Brokerages see more volatility ahead. Goldman Sachs sees last week’s US sanctions on tanker fleet carrying Russian oil pushing up benchmark Brent crude to $85/barrel in the near-term and $90 if any reduction in Russian shipments coincide with a possible decline in Iranian output.
A reduction in Russian supplies will prompt India, the second-largest buyer of Russian crude after China, to pivot towards its traditional Middle-East suppliers, Africa and the Americas. This could already be happening, with ship-tracking agencies recently reporting a gradual increase in the share of Middle-East shipments. But that could be partly because of razor-thin discounts on Russian crude amid low oil prices and Moscow curtailing exports as its refineries increase run rate to meet heightened winter demand for products at home.
