Fuel consumers can breathe easy as Opec cuts price outlook.

NEW DELHI: Fuel consumers can breathe easy. The two recent consecutive increases in pump prices prompted by the rise of global crude is unlikely to become a trend, with Opec saying oil prices may not rise beyond $60 a barrel till 2020.

The projection made in Opec's latest outlook, released on Tuesday, shaves $20 off its previous estimates of $80 a barrel. The downward revision underlines the bearish factors that still hold sway over the world oil market in spite of recent efforts by cartel members for consensus on cutting production to prop up prices. This is borne out by the fact that prices have once again fallen after brief spell of rise.

The Opec basket - mix of crude produced by member countries - is marginally cheaper than global benchmark such as Brent. So a ceiling not higher than $60 bodes well for India as Dubai-Oman grades - key components of Opec basket - have nearly 80% weightage in the country's import basket.

The cost of India's oil purchases has been hovering in the region of $45 a barrel in the last few months. Going by Opec's latest outlook, oil prices are expected to move in a narrow range and may rise towards the $60-mark only towards the end of 2019 0r 2020.

This means an extended comfort zone for the government and small doses of price changes - both up and down - for consumers. According to the oil ministry's oil market tracker Petroleum Planning and Analysis Cell, the country's oil import bill is expected to rise only by 4% to $66 billion in 2016-17 from $64 billion in 2015-16, considering Indian basket at $45 per barrel and dollar exchange rate of Rs 67 in the remaining part of the fiscal. This is still a far cry from $113 billion spent on oil imports in 2014-15.

Lower oil import bill saves foreign exchange, which has a direct bearing on current account deficit and the rupee's strength. Above all, oil's range-bound movement in the current price zone would help keep inflation under check. That only means the good times will keep rolling generally and the occasional pump price hikes will not burn a big hole in people's wallets.

Source : timesofindia.indiatimes.com