After OPEC's allies rejected additional production cuts proposed by the organisation, oil prices in the international market sank as much as 10 percent to multi-year lows on Friday.
International oil prices sink
Major international oil price benchmarks saw one of their worst falls in at least 3 years. The US West Texas Intermediate (WTI) crude closed 10.07 percent or $4.62 lower on Friday at $41.28, its lowest level since August 2016. It touched a low of $41.11 per barrel during the day, making it the WTI's worst day since 28 November 2014.
Brent crude fell 9.4 percent to settle at $45.27 per barrel and hit a low of $45.18, during the day, the lowest since June 2017.
OPEC+ Meeting Ends With No Deal
In the meeting between OPEC (Organization of the Petroleum Exporting Countries) and its allies, also known as OPEC+, concluded with no deal to make additional production cuts. The current production cuts will remain in place till March as planned and while the oil-producing countries continue monitoring the situation.
According to a CNBC report, Russian Energy Minister Alexander Novak said after the meeting the decision was made "because no consensus has been found of how all the 24 countries should simultaneously react to the current situation."
"So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments," he added.
Oil prices decline on fall in demand amid coronavirus epidemic
Oil prices have been tumbling since the outbreak of coronavirus that has threatened demand for the commodity as economic activity slows down.
Indian consumers to benefit
A fall in international oil prices will benefit domestic consumers of fuel. Being a highly import-dependent country for its fuel supply, falling oil prices will help reduce pressure on India's current account deficit and in turn the rupee. As for retail prices of petrol and diesel, these are re-set every day by state-run distributors based on international prices and forex rates.
On Saturday, petrol prices per litre were lowered by 12 paise to Rs 71.02 in New Delhi, Rs 73.70 in Kolkata, Rs 76.71 in Mumbai and Rs 73.78 in Chennai. Diesel prices per litre were also cut to the same degree to Rs 63.69 in New Delhi, Rs 66.02 in Kolkata, Rs 66.69 in Mumbai and Rs 67.21 in Chennai.
However, starting 1 April, state taxes on petrol and diesel in Maharashtra and Karnataka will increase, offsetting the gains from fall in international oil prices.
This week, Uddhav Thackeray-led Maha Vikas Agadi government in Maharashtra announced one rupee per litre increase in VAT on petrol and diesel at the State Budget. Karnataka Chief Minister B S Yediyurappa raised state tax on petrol from 32 percent to 35 per cent and on diesel from 21 percent to 24 percent