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Diesel price on Monday was hiked by 25 paise per litre -- the third increase since last week -- and more rate hikes for both diesel and petrol are in the offing in the coming days as international oil prices have soared to a three-year high.
The price of diesel was hiked to Rs 89.32 per litre in Delhi and to Rs 96.94 in Mumbai, according to a price notification of state-owned fuel retailers.
This is the second straight day of increase in diesel prices and the third since September 24 when the state-owned oil firms ended a three-week hiatus in rates.
Just like the previous two occasions, petrol price was not changed on Monday.
It costs Rs 101.19 a litre in Delhi and Rs 107.26 in Mumbai.
However, industry sources said the price of petrol, alongside diesel, is likely to be increased in the coming days as the rally in international crude oil prices has continued, with Brent Future prices quoting at more than $78 per barrel since September 24.
Crude oil prices have reached a nearly three-year high as global output disruptions have forced energy companies to draw more crude oil out of their stockpiles.
Accordingly, US crude oil inventory levels are also nearing a three-year low.
"Global demand for crude oil has been increasing consistently with the easing of pandemic restrictions and improving vaccination rates.
"On the supply side, OPEC+ alliance has been slow in easing output restrictions, contributing to the tightened supply in the market," a source said.
Additionally, hurricanes Ida and Nicholas have impacted crude oil production in the US Gulf of Mexico region, when they hit in late August and September respectively.
As per both IEA and OPEC, global demand is expected to outpace supply due to which international oil prices will likely remain firm in the near to mid-term.
A simultaneous rally in natural gas is also likely to drive demand for alternate fuels.
State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) had on September 24 resumed daily price revisions, ending the pause in rates since September 5.
In all, diesel prices have gone up by 70 paise a litre, negating more than half of the Rs 1.25 a litre cut in prices that happened between July 18 and September 5.
Before this, diesel price was last increased on July 15. On the other hand, an increase in the price of petrol has so far been spared by oil firms.
The last increase in petrol rate was on July 17.
"However, with no respite from surging international prices, a rise in retail prices of both petrol and diesel is likely in the coming days," the source said.
When international oil rates fell in July and August, retail prices of petrol and diesel in the Delhi market were reduced by Rs 0.65 and Rs 1.25 per litre.
Prior to that, petrol price was increased by Rs 11.44 a litre between May 4 and July 17.
Diesel rate had gone up by Rs 9.14 during this period.
The price hike during this period pushed petrol prices above the Rs 100-a-litre mark in more than half of the country, while diesel crossed that level in at least three states.
India is dependent on imports to meet nearly 85 per cent of its oil needs and so benchmarks local fuel rates to international oil prices.