Petrol, diesel prices may go up by 5-8% next quarter: Crisil

Tribune News Service

New Delhi, December 6

Crisil Research today said it expects the price of petrol to rise by 5-8% and that of diesel by 6-8% over the next 3-4 months after last Wednesday’s decision by the Organization of Petroleum Exporting Countries (OPEC) to cut crude oil production by 1.2 million barrels per day (mbpd).

The report said for instance, in Mumbai, that would mean petrol price could top Rs 75 per litre compared with Rs 72 now, and diesel more than Rs 64 as compared to Rs 60 now.

Crisil said the price of Brent crude could increase to $50-55 per barrel by March 2017 following the OPEC’s move, and if it surges to $60 as some believe, the price of petrol could touch Rs 80 and diesel Rs 68 per litre.

“As for domestic demand, we expect demonetisation and the consequent reduction in economic growth to curb usage, but things would rebound once currency in circulation reverts to normal levels,” the report said.

A cut in production always lifts prices, but the success of the OPEC agreement depends on adherence. Previously, there have been instances of members breaking away from the cartel because of domestic compulsions.

According to the report, globally, oversupply is estimated at 1.4-1.7 mbpd at present, which means the OPEC production cut would balance out demand and supply in the second half of 2017.

“What will also curb a runaway rise in crude prices is that above $50, many shale producers in the US become viable once again,” the report said.