Fuel prices may rise as Saudi Arabia won’t allow glut

New Delhi: Saudi Arabia and International Energy Agency (IEA) on Wednesday indicated that oil prices will continue to remain high forcing Indian consumers to shell out more money for petrol and diesel.

This even as state-run oil marketing companies IOC and HPCL denied reports that government has asked them to avoid raising the retail price of petrol and diesel in view of next month’s elections in Karnataka. 

According to reports Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) were asked to absorb up to Rs 1 a litre hike. Shares of IOC fell as much as 7.6 per cent after the news of government asking oil firms to not raise prices broke. HPCL lost as much 8.3 per cent.

“No, we haven’t heard from the government anything (on dropping daily price revision),” IOC chairman Sanjiv Singh said.  

HPCL CMD M.K. Surana too said the company is not aware of any directive to oil companies not to pass on the rise in international oil prices.

Meanwhile indicating oil prices will rise, Saudi Arabia’s energy minister  Khalid al-Falih said on Wednesday that the world’s biggest exporter of oil will not sit by and let another supply glut surface. He said that members of Opec are seeking a close balance between supply and demand. 

Energy minister from many countries are in India to participate in International Energy Forum, a gathering of oil producers and consumers. 

Opec, Russia and several other non-Opec producers began to cut supply in January 2017 in an effort to erase a global glut of crude that had built up since 2014. They have extended the pact until the end of 2018.

“I think a lot of the glut has been cleared,” said Mr Falih.Brent crude was trading above $70 a barrel on Wednesday.

IEA also said that global oil demand will not peak in the near future and India’s vulnerability to high  prices will increase with surge in its crude oil imports.

Oil demand will continue to grow stronger this year, at about 1.5 million barrels per day, driven by petrochemicals and other sectors, IEA ED Fatih Birol said. “We are not going to see peak in oil demand very soon. I am now worried that we don’t have enough investment to meet oil demand growth,” he said.  

He said price spike is not good for anybody, especially for India, where the economy is heavily dependent on oil imports.