Will petrol and diesel prices be cut soon? Here's what Union Oil Minister Hardeep Puri said…

Union Minister of Petroleum and Natural Gas Hardeep Puri on Thursday said petrol and diesel prices would only be cut if international prices remain low for a period of time, according to a PTI report. He noted that while international oil prices have come down, state-run oil marketing companies (OMCs) are still processing crude bought at the height of the war in West Asia.

When asked whether petrol and diesel prices will be slashed, the Union minister told reporters that it would be a legitimate question if oil prices stay low for the next few weeks.

Could petrol and diesel prices be cut?

Notably, the report added that oil companies usually purchase crude oil at least two months in advance. This raw material is then used to produce fuel. Thus, for fuel being processed and produced at present, the crude oil was essentially bought at the height of the oil price hikes in April or early May, it further said.

Thus, Puri's statement on price cuts noted that such action would require sustained low oil prices for the next few weeks. The report further noted that crude oil prices started coming down only in the second half of June after the United States and Iran reached an agreement to end their war.

The forecasts seem positive. Morgan Stanley cut its oil predictions for the second time in the span of two weeks after flows through the Strait of Hormuz returned to normal faster than it was earlier anticipated.

Morgan Stanley has said that on Thursday, 35 oil and gas tankers passed through the Persian Gulf using the Strait of Hormuz. It was the first time since the conflict started in February that the level returned to its typical 30-40 range. In order to balance the oil market in 2027, flows through the strait will have to return to around 65% of the pre-conflict level, which is around 11-to-12 million barrels per day, Bloomberg quoted the bank as saying.

Here's how much oil companies face in losses

Puri further said that oil companies have suffered a loss of ₹74,781 crore by selling petrol, diesel and liquified petroleum gas (LPG) below cost in the period up to 30 June, the report added.

“Oil companies suffered ₹74,781 crore loss for selling petrol, diesel and LPG below cost in the period up to June 30. International oil prices have come down, but companies are still processing crude bought at the height of the West Asia crisis,” he stated.

Status today: Crude oil prices extend decline for third session

Early today, oil prices declined for a third straight session as crude shipments through the Strait of Hormuz increased and indirect negotiations between the US and Iran showed signs of progress, as per a Bloomberg report. Brent crude for September delivery traded near $71/barrel after falling more than 3% over the previous two sessions, while West Texas Intermediate hovered around $68/barrel, it said.

As per the Bloomberg report, oil prices have fallen the fastest this quarter since 2020, as steady crude shipments continued through the Strait of Hormuz. It added that although overall supply remains somewhat constrained, the United Arab Emirates has restored exports to pre-conflict levels through alternative logistics, while major US crude benchmarks have slipped to discounts amid weakening demand for American oil.

(With inputs from PTI, Bloomberg)