Prevailing weakness in the rupee coupled with crude oil around $73.50 per barrel does not leave enough room for oil marketing companies to pass on any major benefit to consumers, say analysts.Domestic petrol and diesel prices were reduced in the range of 10-11 paise per litre across Delhi, Kolkata, Mumbai and Chennai on Monday, marking the first increase after four days.
Diesel prices were cut by 13-15 paise per litre.
(Read more)The rupee traded in the range of 68.71-68.48 against the US dollar on Monday, before settling at 68.57 for the day.
The rupee has weakened by a further 1.7 per cent since May, a month marked with domestic fuel oil prices hitting all-time highs in some locations, riding on the back of crude oil prices hitting 2014 highs.In the international market, crude oil prices are just above $73 per barrel.
Brent crude - the international benchmark for crude oil prices - fell by $1.69 per barrel to an intraday low of $73.64 per barrel.Although reopening of Libyan ports led to a significant downward movement in crude oil prices, the recovery was short-lived as the prices went back above $75 a barrel, say analysts.
Supply outages in Libya, a labour dispute in Norway and unrest in Iraq all helped push oil prices higher late last week, although prices still fell for a second straight week.
Yet, crude oil prices have recovered nearly 8 per cent from May highs of around $80 a barrel."We may see a minor correction in domestic fuel prices, but major relief still look far, and the consumer has to wait for a further correction in Brent oil below $72 per barrel to get a significant reduction in Indian petrol and diesel prices," said Abhishek Bhansal, founder and chairman of ABans Group of Companies.Analysts expect crude oil prices to remain below $82 per barrel in any case for the time being.
Astha Jain, senior research analyst at Hem Securities, expects $82 per barrel to act as an important resistance."with the combination of factors like resistance at $82 level and unwillingness on part of government to increase fuel price, we are not expecting any major hike in domestic petroleum prices going forward," adds Ms Jain of Hem Securities.
"We need to track the US Crude inventory report closely which release on every Wednesday to get a further clue about the oil prices in coming weeks," Mr Bansal added.Wholesale inflation surged to 5.77 per cent in June, the highest level in four and a half years, government data released on Monday showed.
Inflation in the 'fuel and power' basket rose sharply to 16.18 per cent in June from 11.22 per cent in May, as prices of domestic fuel increased during the month in line with rising global crude oil rates.Meanwhile, separate data last week showed trade deficit widened to a more than three-and a-half-year high of $16.6 billion, led by costlier crude oil imports.
India meets more than 80 per cent of its crude oil requirements through imports.