Diesel can be market-priced by September as crude goes under $100

New Delhi : With the losses of state-run oil marketers on diesel sales below cost falling to under a rupee per litre, brokerage firm Goldman Sachs Tuesday estimated the monthly price hikes would end after September assuming that oil prices remain around the current $100 level.

Estimating diesel under-recoveries, or losses, to fall to 30 paise a litre after the price hike in September, Goldman Sachs said in a report: “This implies we could effectively be done with the monthly cycle of diesel price increases in next two months and diesel will be market-priced.”

In January 2013, the government allowed oil marketing companies (OMCs) to monthly raise diesel rates in small doses of 40-50 paise a litre towards wiping out losses.

Since then, rates have cumulatively risen by Rs.11.24 per litre in 18 instalments.

OMCs, effective Aug 16, are incurring combined daily under-recovery of about Rs.230 crore on the sale of diesel, PDS kerosene and domestic LPG.

Meanwhile, international crude prices hovered near 14-month low of $100 a barrel as worries over conflict in Iraq eased, and as higher Libyan oil output added to ample supplies coupled with weak demand. The price of Indian basket on Monday decreased to $100.04 per barrel.

The basket of 12 crude oils of the Organisation of Petroleum Exporting Countries (OPEC) stood at $99.42 a barrel Monday, compared to $99.94 last Friday, according to the OPEC Secretariat.

“OPEC countries will take action if oil goes below $100 because they won’t be able to maintain their budgets,” said Yusuke Seta, a commodity sales manager at Newedge, Japan.