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Domestic fuel retailers may slash petrol and diesel prices as international crude oil prices declined over demand concerns because of the resurgence in covid-19 cases in Europe, two people aware of the development said.

Benchmark Brent crude plunged by 6.95% to $78.89 a barrel on Friday from $84.78 10 days ago, and the lowest since 1 October.

“State-run oil companies have made some small gains on automobile fuels, but they preferred to watch the declining trend in global oil markets for some time before passing on the benefit to the consumer, as in the past, fall in fuel rates was quickly followed by a spike," one of the two people said. Immediate price cuts would, however, be under 1 per litre, he added.

Retail prices of automotive fuels in India, which are linked with daily fluctuations of international benchmarks, have been flat since 4 November, when the government cut central levies on petrol and diesel by 5 and 10 a litre, respectively. In Delhi, petrol has been stable for the last 18 days at 103.97 per litre, and diesel at 86.67.

“For the first time in months, international oil prices fell due to demand concerns, else producers were keeping oil prices artificially high by restricting supplies, ignoring the pleas of major consumers such as the US and India," the second person said. India is the third-largest importer of crude oil after the US and China.

Experts said state-run oil marketing companies should pass on the benefit of falling global oil prices to consumers as they are supposed to revise retail petrol and diesel prices daily.

“Since oil prices have fallen and are likely to fall in future, India’s oil marketing companies are also required to pass on the benefit of reduced oil prices on a day-to-day basis to give relief to consumers and to facilitate high economic growth," said S.C. Sharma, a former officer on special duty at the erstwhile Planning Commission.

India has seen an unprecedented rise in retail auto fuel prices. One reason for the high domestic fuel prices was the production curbs by the Organization of the Petroleum Exporting Countries.

In April 2020, international oil prices plunged to below $20 following the global lockdowns to contain the covid-19 pandemic. Subsequently, on 12 April, OPEC-plus, which includes Russia, announced an unprecedented 9.7 million barrel a day output cut. Despite a rise in demand, the grouping did not restore supplies, which led to a spike in international oil prices.

Oil prices, however, fell below $80 a barrel on Friday due to a surge in covid cases in Europe, leading to lockdowns and restrictions in several countries. While Austria has decided to impose a full lockdown from Monday, Russia saw record covid deaths.

Besides, the US is considering releasing oil from its strategic reserves to ease prices and asked other consumers, including China, India and Japan, to follow suit. Japan is the fourth biggest oil consumer in the world.

“It is expected that with the gradual increase in supplies and new oil and gas projects, adding incremental oil and gas could lead to oil prices going down further. Over the last few days, oil prices have gone down by $6-7 per barrel," Sharma said, adding that the supply-demand mismatch would continue.

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