India is losing the advantage of low international oil prices as its cost of crude imports in the rupee terms has surged by 69% in just two months, forcing state-run oil marketing companies to raise cooking gas prices for the first time after February by Rs 11.50 per cylinder.
"For the month of June 2020, there has been an increase in international prices of LPG. Due to an increase in the prices in the international market, the RSP [retail selling price] of LPG in the Delhi market will be increased by Rs 11.50 per cylinder," state-run Indian Oil Corporation (IOC) said in a statement on Sunday.
A 14.2 kg cooking gas cylinder in Delhi is now priced at Rs 593. Prices in other cities will vary depending on local levies.
IOC said retail prices of cooking gas was slashed substantially by Rs 162.5 a cylinder in Delhi last month to Rs 581.50 because of a steep decline in international prices.
India's average crude oil import price surged by about 69% to Rs 2,516.77 per barrel in just two months, from Rs 1,491.57 a barrel on April 1, according to Petroleum Planning and Analysis Cell of the oil ministry.
Benchmark Brent crude, which had plunged from over $51.9 per barrel on March 2 to below $20 a barrel by April 21 due to slack demand and oversupply, is now hovering around $38 a barrel amid chances of prolonged supply cut by producers' cartel and demand revival due to lifting of Covid-19 lockdowns in many countries, including India.
There are indications that international oil prices may go further up as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, particularly Russia (together OPEC+), are expected to meet on June 4 to discuss extending production cuts beyond this month.
On April 12, OPEC+ decided to cut overall crude oil production by 9.7 million barrels per day or a 10th of global output from May 1 for an initial period of two months ending June 30. The producers' cartel decided to shun the price-war among them and agreed to a synchronised supply cut to stabilise crude prices.
SC Sharma, a former officer on special duty at the erstwhile Planning Commission, said two signs of international oil prices firming up are global demand is picking up fast, and OPEC+ could further extend the production cuts. "That may lead to oil prices going beyond $40 per barrel. In that situation, the oil companies may have to hike petrol and diesel prices by Rs 5 and Rs 6.5 per litre [respectively] or the government may have to reduce the additional excise. As the prices have not been revised by OMCs [oil marketing companies] for a month, any increase in import price beyond $30 per barrel may adversely impact OMCs."
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