Brace for increase in fuel bill

With the announcement of an output cut by the Organization of the Petroleum Exporting Countries (OPEC), a sharp increase in the petrol and diesel prices seems inevitable.
Keeping in norm with the deregulation policy of India, the price rise would come into effect only by the middle of this month, when the oil marketing companies of India would revise their prices, depending on global oil prices and rupee’s movement against dollar.
OPEC would undertake its first reduction since 2008 to tide over all the losses it went through since the price crash in 2014. The decision has sent a strong message to its skeptics and has sent crude oil prices soaring. The benchmark oil prices gained as much as 10 percent in New York and the share prices of energy companies around the globe jumped alongside the currencies of large exporters. Another significant mention would be of Whiting Petroleum Corp. which saw a rise of 32 percent-its biggest one day jump in 13 years. However, the severity followed by the OPEC members would be vital in sustaining this progress considering nations like Saudi Arabia, Iran and Iraq still dilly dallying over its volume cuts.
The OPEC members are going for a massive inventory cut by reducing output by about 1.2 million barrels a day by January as per the discussions in Algiers. This would bring the production to 32.5 million barrels. Saudi Arabia will reduce its output by 486,000 barrels a day to 10.058 million a day. Iraq, the second largest producer, has agreed to cut its production by 210,000 barrels a day. The United Arab Emirates and Kuwait will reduce output by 139,000 barrels a day and 131,000 a day, respectively. In a surprising turn of events, Russia, a non-member has agreed for 300,000 barrels a day cut.
The agreement exempted Nigeria and Libya from any cuts. The group plans to meet again on May 25 in the year 2017, wherein they plan to extend the cuts by another six months.
India imports more than three-fourth of its crude oil requirements. With the value of the rupee as well as the margins of oil marketing companies and various government levies, along with global oil prices, determining the final price of petrol and diesel price in India a rise in fuel price is imminent. Adding fuel to the fire is a discouraging prognosis of rupee, which is expected to remain weak against the dollar.
After the agreement, the fuel prices are expected to hover around an average of $55 per barrel according to experts.

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