Retail fuel price is set to ease out over the next few months, as the crude oil demand subdued across the globe. Crude oil prices are expected to remain low due to weak consumption. The global crude oil demand was hit hard by the coronavirus and the widespread shutdown of China’s economy, immediately after the first week of the year 2020.
“Demand is now expected to fall by 435 kb/d on-year in Q1 FY20, the first quarterly contraction in more than 10 years. We have cut our 2020 growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011,” said Oil Market Report – 2020 by International Energy Agency (IEA).
Petrol and diesel prices have significantly fallen since the beginning of this calendar year 2020. Both petrol and diesel prices fell over Rs 3 per litre in Delhi in the period, according to the figures provided by Indian Oil. The major reason behind the fall in the fuel prices is the sliding crude prices in the international market. Brent crude price has fallen around 15 per cent since the beginning of the year.
Multiple factors such as crude prices, the value of rupee against the dollar, demand in the international market etc. have contributed to the downtrend in fuel prices. Historically during the months of February and March, fuel prices remain sluggish.
Meanwhile, there are multiple reasons for the fall in crude prices as well. A blockade in Libya slashed production and the UAE saw output fall by 0.3 million barrels per day (mb/d). Global oil supply slumped by 0.8 mb/d in January. But the world oil output was largely unchanged as lower supply from OPEC was offset by a significant increase in non-OPEC production.
Further, on the back of a major stir in China’s economy, the global growth forecast has been lowered. “For 2020 as a whole, we have reduced our global growth forecast by 365 kilo barrels per day (kb/d) to 825 kb/d, the lowest since 2011. Growth in 2019 has been trimmed by 80 kb/d to 885 kb/d on lower-than-expected consumption in the OECD,” the IEA report added.