Ever since the West Asia conflict sent crude oil prices soaring, the world has been dealing with an energy crisis. Finally, there are signs that Indian consumers could eventually see some relief at the fuel pump.
Global oil prices have retreated sharply from their wartime peaks, Saudi Arabia has announced its biggest crude price cut for Asian buyers in more than two decades, and OPEC+ has once again agreed to raise production. Together, these developments have fuelled expectations that petrol and diesel prices could ease in the coming months.
However, analysts say the outlook is not as straightforward as lower crude prices automatically translating into cheaper fuel. India's state-run oil marketing companies (OMCs) are still recovering from heavy losses incurred earlier this year, meaning consumers may have to wait before any benefit reaches retail pumps.
International oil prices edged higher on Tuesday but remained close to levels seen before the US-Iran conflict erupted earlier this year.
Brent crude futures rose 1.2 per cent to $72.84 a barrel, while US benchmark West Texas Intermediate (WTI) climbed 1.1 per cent to $69.29 a barrel, according to Reuters.
The market's attention has gradually shifted away from immediate geopolitical fears towards recovering oil supplies and future demand prospects.
"The steps towards recovery in supply have eased the immediate risk premium, but the market remains wary of putting too much faith in the stability of the current truce given the on-again, off-again nature of US-Iran relations," Tim Waterer, Chief Market Analyst at KCM Trade, told Reuters.
Waterer added that investors are now closely watching demand, particularly from China, to determine the next direction for oil prices.
Another factor weighing on crude prices is OPEC+'s decision to continue unwinding production cuts.
The producer alliance agreed over the weekend to increase output by another 188,000 barrels per day from August, following similar production increases in June and July.
Saudi Arabia and Russia will each raise production by 62,000 barrels per day, while Algeria and Oman will also increase output.
In a further signal that supplies are improving, Saudi Aramco slashed the August official selling price of its flagship Arab Light crude for Asian buyers by $11 compared with the previous month, marking its largest monthly reduction in more than 20 years, according to Reuters and a Saudi Aramco pricing statement.
Analysts cited by the Financial Express said the move reflects Saudi Arabia's attempt to protect its market share in Asia amid growing competition from Russian and Iranian crude, rather than the beginning of another oil price war.
The gradual recovery of shipping through the Strait of Hormuz has also helped calm energy markets.
While tanker movements have picked up following the interim understanding between Washington and Tehran, analysts caution that exports have not yet fully returned to normal.
According to Reuters, shipping companies remain cautious despite easing geopolitical tensions, slowing the pace at which Gulf crude exports can recover.
ANZ analysts noted that the initial rebound in tanker traffic has stalled, with vessel crossings remaining below pre-war levels.
Meanwhile, the United Arab Emirates has increased production above 3.8 million barrels per day, its highest level since April 2020, further boosting expectations of improving global supply.
Despite crude prices retreating significantly from their March highs, Indian motorists have not yet seen a corresponding reduction in retail fuel prices.
The reason lies in the financial position of public sector oil retailers.
According to government estimates cited earlier by Petroleum Minister Hardeep Singh Puri, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) suffered losses of nearly Rs 1,000 crore every day when global crude prices surged while retail pump prices remained largely unchanged.
Officials have indicated that these companies are now using the benefit of lower crude prices to recover those losses before considering any reduction in petrol and diesel prices.
Private retailers have already begun passing on some benefits. Nayara Energy reduced petrol prices by Rs 5 per litre and diesel by Rs 3 per litre, while oil companies also lowered prices of 19-kg commercial LPG cylinders from July 1.
However, public sector fuel retailers have not announced any reduction in petrol or diesel prices so far.
While improving supply has helped cool oil prices, analysts believe future price movements will increasingly depend on global demand.
Reuters reported that traders are closely monitoring China's consumption trends, as markets have already factored in much of the recent improvement in supply.
At the same time, President Donald Trump's latest warning that the US could either strike a deal with Iran or "finish the job" has reminded markets that geopolitical risks have not disappeared completely.
Any renewed disruption around the Strait of Hormuz could quickly reverse the recent decline in crude prices.
Industry observers believe the possibility of a fuel price cut has improved considerably compared with just a few months ago.
Brent crude has now returned close to levels seen before the conflict, while additional OPEC+ production and Saudi Arabia's pricing decisions suggest that global supplies are becoming more comfortable.
However, analysts say Indian consumers are unlikely to see immediate relief unless crude prices remain at current levels for a sustained period.
Only once state-run OMCs recover a meaningful portion of the losses accumulated during the recent oil price spike are they expected to consider reducing petrol and diesel prices.
