Saudi oil crisis: Fuel prices may go up to Rs 6 in coming weeks; airfares likely to soar by 15% dampening festive cheer

Air travel in the coming festival season may turn out to be a dampener with fares expected to go up on account of the continuing oil crisis in Saudi Arabia. The price of fuel is expected to surge, too, due to the crisis. The biggest-ever surge in oil prices after an attack wiped out about half of Saudi Arabia’s output capacity over the weekend, according to media reports. Crude dropped on Tuesday although the market remains on tenterhooks over the threat of a military response to attacks on Saudi Arabian crude oil facilities that cut the kingdom’s output in half and sent prices soaring by the most in decades. Fuel prices rise  The price of petrol increased by 18 paise and that of diesel by 33 paise on Tuesday, the third day of the drone strikes on Saudi Arabia’s oil facilities. Price of a litre of petrol on Tuesday in various metros were Rs 72.17 in Delhi, Rs 77.85 in Mumbai, Rs 74.89 in Kolkata, Rs 76.69 in Hyderabad, Rs 76.72 in Bengaluru and Rs 74.99 in Chennai. On Monday, petrol retailed at Rs 72.03 in Delhi,  Rs 74.76 in Kolkata, Rs 77.71 in Mumbai, Rs 74.85 in Chennai per litre. On Tuesday, diesel was retailing at Rs 65.58 in Delhi, Rs 68.78 in Mumbai, Rs 67.99 in Kolkata, Rs 71.49 in Hyderabad, Rs 67.81 in Bengaluru and Rs 69.31 in Chennai. On Monday, diesel price in Delhi was Rs 65.43, Kolkata Rs 67.84, Mumbai Rs 68.62 and Chennai Rs 69.15 per litre. Prices of petrol and diesel in India may shoot up by Rs 5 to 6 a litre in next fortnight, said a report in The Economic Times quoting experts. India, the world’s third-largest oil consumer, will not face any supply disruption after a reduction in production at its No. 2 supplier Saudi Arabia, Oil Minister Dharmendra Pradhan had said on Monday. “Following the attacks on the oil stablization centres of @Saudi_Aramco, top executives of Aramco have been contacted,” he tweeted. “We have reviewed our overall crude oil supplies for the month of September with our OMCs. We are confident there would be no supply disruption to India.” [caption id=“attachment_5244811” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] A recent report by Kotak said that in light of the sharp rise in international crude oil prices, Indian oil marketing companies (OMCs) may increase the retail price of diesel and gasoline by Rs 5 to 6 per litre in the following fortnight. Oil prices soared as much as 20 percent to above $71 a barrel as markets reopened after a major attack on Saudi Arabia’s oil infrastructure. The Saturday attack raised the prospect of a major supply shock in a market that in recent months had focused on demand concerns due to the erosion of global growth amid the ongoing US-China trade dispute. Saudi Arabia is the world’s top oil exporter and has been the supplier of last resort for decades. Crude prices decline Brent crude was down 30 cents, or 0.4 percent, at $68.72 a barrel, and West Texas Intermediate was down 57 cents, or 0.9 percent, at $62.33 a barrel. Earlier, the crude benchmarks both fell by around 2 percent. Yemen’s Iran-aligned Houthi group said it attacked two plants at the heart of Saudi Arabia’s oil industry on Saturday, knocking out more than half the Kingdom’s output, in a move expected to send oil prices soaring and increase tensions in the Middle East, a Reuters report had said. The attacks will cut the kingdom’s output by 5.7 million barrels per day (bpd), according to a statement from state-run oil company Saudi Aramco, or more than 5 percent of global oil supply. On Monday, WTI Crude prices surged over 14.6 percent to close at $62.9 per barrel, said a report by Angel Commodities. Severe attacks on Saudi’s two major oil facilities might lead to global shortage and in turn support crude, the report said. According to reports, oil prices witnessed their biggest daily gain since the Gulf war in 1991. At least five Asian refiners including two in India, are set to receive their full allocated volumes of crude oil from Saudi Arabia, following attacks on Saudi oil facilities over the weekend, several sources familiar with the matter told Reuters. Indian state refiners will receive full volumes from Saudi Arabia for October, three of the sources said. Two other refiners in North Asia also said Saudi Aramco has told them that there is no change to the loading schedule in September and October. “Saudi has confirmed (to us) that our refinery will fully get its requested loading in September and October. We have not been asked to switch or delay,” one of the sources said. Airfares to become costly “Average airfares may go up 10-15 percent from the current level for travel in October-November. Fares are expected to increase from last week of September but, if the crude oil price remains elevated, airlines may hike fares earlier,” said an executive from a private airline to Business Standard. Air India’s monthly fuel bill might rise by at least Rs 50 crore if the crude oil prices continue to surge in the wake of drone attacks on oil facilities in Saudi Arabia, a senior airline official said on Monday. The national carrier’s fuel bill every month is around Rs 500 crore. According to the official, the bill could go up by at least Rs 50 crore if the oil prices jump 10 per cent from $60 per barrel level on a sustained basis,  a PTI report said. An increase in oil prices could also result in fares going up as costs would have to be passed on, he added. Besides, steep foreign exchange rate fluctuations would increase the fuel costs since payments are made in dollars, the official said. As the surge in oil prices roiled markets, aviation stocks also tumbled. Shares of domestic carrier SpiceJet dropped 3.95 percent to Rs 126.40 on the BSE. The scrip of InterGlobe Aviation, parent of the country’s largest airline IndiGo, fell 2.71 percent to Rs 1,671.70 on the exchange. According to reports, oil prices witnessed their biggest daily gain since the Gulf war in 1991. At least five Asian refiners including two in India, are set to receive their full allocated volumes of crude oil from Saudi Arabia, following attacks on Saudi oil facilities over the weekend, several sources familiar with the matter told Reuters. Indian state refiners will receive full volumes from Saudi Arabia for October, three of the sources said. Two other refiners in North Asia also said Saudi Aramco has told them that there is no change to the loading schedule in September and October. “Saudi has confirmed (to us) that our refinery will fully get its requested loading in September and October. We have not been asked to switch or delay,” one of the sources said. (With inputs from agencies)