The Hindu Business Line : Indian crude basket drops below $60

Oil cos' woes
As on September till date, the under recoveries stood at Rs 3.20 per litre on petrol; Rs 7.00 per litre on diesel; Rs 18 a litre on kerosene; Rs 195 per cylinder on cooking gas.

New Delhi , Sept. 18

After flirting at around $70 a barrel, the Indian crude basket touched the year's lowest on Friday. The basket was at $59.92 per barrel. The week starting September 11 saw the Indian basket declining by $2.33 per barrel (from $62.25 to $59.92).

During the last 30 days, the basket had fluctuated between $75.20 per barrel and $59.92.

Margins

This may come as good news for consumers of petroleum products. For oil companies, it evokes a mixed response. While marketing margins of the State-owned oil retail companies such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum are likely to improve if the trend continues, the refinery margins could still remain a cause of concern, industry sources told Business Line.

The refinery margins depend on differences between crude oil prices and product prices.

Impact

Sources said dip in crude prices would help marketing losses to come down, but the companies have not turned the corner as yet.

As on September till date, the under recoveries suffered by the oil retail companies on petroleum products stood at Rs 3.20 per litre on petrol, Rs 7.00 per litre on diesel, Rs 18 a litre on kerosene and Rs 195 per cylinder on cooking gas.

During 2004-05, Indian Oil's gross refining margin rose by about a dollar per barrel to $6.20 per barrel,compared with $5.30in 2003-04.

If the current trend continues, there may be a dip in refinery margins. However, sources in IndianOil point out that one has to wait till October and it was still premature to comment on the trend of the crude basket on a short-term decline.

The Indian crude basket average from April 2006 to September 15 stood at $68.18 a barrel. And the September 1-15 average stood at $63.32 a barrel, while the average for the current quarter July till September 15 stood at $69.46 per barrel.

"When the last price hike happened on June 5, the international crude was ruling at around $66 a barrel, and the Indian basket was at $62 a barrel. Even then, if the current ruling prices of MS and HSD are integrated backwards, the domestic basket would match a price of $52 a barrel.

"In other words, unless the Indian basket falls below $52 a barrel, the domestic consumers should not expect any reduction in retail prices," sources explained.

In the international market, the Brent on Monday was up 51 cents at $63.49 per barrel at 18:03 hrs.

The composition of Indian basket is based on total industry processing of sweet and sour crude oil and represents f.o.b. prices of average Oman/Dubai crude for sour and Brent (dated) for sweet grade in the ratio of 59.8:40.2.

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