How low can oil go | Explained

Crude oil prices returned to the levels last seen before the start of the war in West Asia, thanks to Indian Oil Corporation to cut prices. While the latest Brent Crude price ticker shows a bounce back above $73 a barrel after a strike on a vessel carrying liquefied natural gas in the Strait of Hormuz, most estimates peg crude oil prices at much lower levels in the coming months. However, not all of it may be reflected in retail prices.

Why did Saudi Arabia decide to cut crude oil prices?

The price of crude oil is down 43% from the peak of $120 a barrel during the war. "Saudi Arabia needed to sell crude for two reasons. One, they had barrels stuck in the Gulf that are coming into the marketplace. Two, their new production is coming online. I believe that their levels of exports are going to be upwards of 90% of what they were at the beginning of the war," Richard Redoglia, CEO of Matrix Global, a Texas-based consulting and energy financing firm, said.

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The increased supply has squeezed spot prices as the number of ships passing through the contested Strait of Hormuz has risen to about 49 a day. "For a country like India, it is good news that there are more suppliers who are vying for this market, and we will get the cheaper oil," MK Surana, Former Chairman and Managing Director of Indian Oil Corporation, said.

The global supply of crude oil is likely to increase further

The Organisation of the Petroleum Exporting Countries (OPEC), the lobby of major oil-producing countries, have increased production by over 940,000 barrels since the start of the war.

Competition has intensified after Bharat Petroleum Corporation (BPCL), and subsequently, raised its exports to a record 3.7 million barrels per day in June.

Meanwhile, Iran is threatening to quit OPEC if it's not allowed to increase production. The country, devastated by the war, has brought more than 44 million barrels of oil to the energy market since the ceasefire on June 17.

Venezuela, too, has become a significant supplier since the regime change in January this year.

Will the price of petrol fall now that crude oil prices are down to pre-war levels?

However, the cost of refining remains high due to outages in many parts of the world, including Russia. That would mean that the price at the petrol pump may not come down in a hurry.

Last week, India's oil minister Hardeep Singh Puri said that the petrol and diesel currently sold at the retail outlets were procured earlier at higher prices. "If lower crude prices exist for the next 2-3 months, it could be a legitimate question on when retail prices will come down, but that is hypothetical right now," Puri added.

The three state-owned companies, Indian Oil Corporation, Bharat Petroleum Corporation (BPCL), and HPCL, clocked a combined loss of ₹74,781 crore between January and June 2026. The losses were largely due to an under-recovery of ₹2.1 lakh crore during the period on all the petrol, diesel, and cooking gas sold by these companies.

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