Crude's drop below $80 triggers first Indian fuel price cuts in 2 years

Crude oil fell below $80 a barrel in early Asian trade Wednesday as easing Middle East tensions unlocked supply routes, triggering India's first retail fuel price cuts in more than two years and a broad repricing of refined products from jet fuel to cooking gas.

"The reopening of the Strait of Hormuz and the de-escalation of hostilities have removed a significant risk premium that was baked into crude prices," said Vandana Hari, founder of Vanda Insights, a Singapore-based energy consultancy. "The speed of the unwind — a near 20 percent decline in two weeks — reflects how quickly the market repriced when the supply threat dissipated."

Brent crude slid to around $78 a barrel, extending a decline from $97.32 in mid-June — the sharpest two-week drop since the 2020 pandemic-induced oil market crash, according to data from the Chamber of Oil Marketing Companies. The selloff accelerated after a June 17 memorandum of understanding between the United States and Iran paused hostilities, reopened the Strait of Hormuz and extended a ceasefire for 60 days to allow further negotiations, though fresh military strikes on June 27 and 28 have renewed pressure on the agreement.

State-owned Indian oil marketing companies cut aviation turbine fuel prices by about 5 rupees a litre to around 110 rupees in Delhi, the first reduction since the recent spike triggered by the West Asia conflict. Commercial LPG prices were reduced by 183.50 rupees per 19-kilogram cylinder to 2,930 rupees, down from a record 3,113 rupees last month. The 5-kilogram Free Trade LPG cylinder also fell by 13 rupees to 808.50 rupees, while domestic 14.2-kilogram LPG cylinders were left unchanged at 942 rupees.

Private retailer Nayara Energy cut petrol prices by 5 rupees a litre and diesel by 3 rupees a litre across its network of more than 7,000 fuel stations, becoming the first retailer to lower pump rates in over two years. The reduction reverses Nayara's March 26 increase, when it raised petrol and diesel by the same amounts after the Iran conflict triggered a crude spike. State-run Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd — which together control more than 90 percent of India's retail fuel market — left prices unchanged, with IOC selling petrol at 102.12 rupees a litre and diesel at 95.20 rupees a litre in Delhi.

The government also revised the windfall tax on petroleum product exports effective July 1, raising the special additional excise duty on petrol to 4 rupees a litre from 1.5 rupees, while cutting the levy on diesel to 8.5 rupees from 14 rupees and on ATF to 7.5 rupees from 12.5 rupees. The changes align export duties with the lower global price environment while protecting domestic supply.

The price relief comes after the government last month introduced an ATF price stabilisation scheme allowing participating airlines to buy jet fuel at a fixed 115 rupees a litre for up to three years. Under the mechanism, if benchmark ATF prices rise above a base rate of 86.32 rupees a litre — equivalent to a retail price of 115 rupees after airport charges, margins and taxes — the government provides interest-free advances to oil marketing companies. When prices fall below the base rate, the excess is recovered and credited to the Consolidated Fund of India.

For Indian consumers, the fuel price cuts offer a potential reprieve from inflationary pressure, particularly for airlines and commercial transport operators where fuel represents a significant cost component. Nayara Energy, which operates a 20-million-tonnes-per-year refinery at Vadinar in Gujarat, has completed a turnaround and is running at full capacity to meet domestic demand. State-owned retailers are expected to review their pump prices at the next monthly revision cycle, with industry projections pointing to further reductions if crude holds below $80 a barrel.

This article is for informational purposes only and does not constitute investment advice.