Global oil prices slumped over 4% on Monday, with Brent crude falling below the $100-per-barrel mark amid hopes of a peace deal between Iran and the US.
Around 7 am, the July contract of Brent on the Intercontinental Exchange was trading at $99.22 per barrel, down 4.17% from its previous close. The July contract of West Texas Intermediate (WTI) fell 4.53% to $92.22 a barrel.
Hopes of a peace deal between Iran and the US, and an eventual easing of energy supply disruptions, calmed markets on Monday.
A prospective peace deal, if it results in the reopening of the , could ease energy supplies from West Asia. However, recovery of damaged energy infrastructure in the region is expected to take time. The Strait of Hormuz remains a critical route for nearly 20% of global oil and gas trade.
A White House post quoting US President Donald Trump said on Sunday: “The negotiations are proceeding in an orderly and constructive manner, and I have informed my representatives not to rush into a deal in that time is on our side… Both sides must take their time and get it right. There can be no mistakes!”
Earlier, Trump had said an agreement had been largely negotiated, subject to finalization between the US, Iran and several other countries, including major partners in West Asia and Pakistan.
Fuel shock
Even as global crude prices eased, raised retail prices of petrol and diesel by over ₹2 per litre on Monday.
This marks the fourth fuel price hike in the past fortnight.
In the national capital, petrol prices crossed the ₹100-per-litre mark after a hike of ₹2.61 per litre. Petrol is now retailing at ₹102.12 per litre in Delhi, according to data from Indian Oil Corporation.
Petrol prices in Mumbai, Kolkata and Chennai rose by ₹2.72, ₹2.87 and ₹2.46 per litre, respectively, to ₹111.21, ₹113.51 and ₹107.77 a litre.
The cumulative increase in fuel prices since 15 May now stands at around ₹7.5 per litre.
Diesel prices in Delhi, Mumbai, Kolkata and Chennai were raised by ₹2.71, ₹2.81, ₹2.80 and ₹2.57, respectively, taking rates to ₹95.20, ₹97.83, ₹99.82 and ₹99.55 per litre.
Inflation risk
While the increase in fuel prices is expected to ease pressure on oil marketing companies, which have been incurring losses on retail sales of petrol and diesel since the start of the war, it is also likely to add to inflationary pressures in the economy.
Given diesel’s extensive use in transportation, agriculture and industry, elevated prices tend to feed directly into inflation.
The price hikes come at a time when (WPI) hit a 42-month high of 8.3% in April, while retail inflation touched a 13-month high of 3.48%.
With consumption of 94.7 million tonnes, diesel remains the most-used petroleum product in the country, accounting for 39% of India’s overall petroleum product basket.