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On Saturday, petrol prices in Delhi breached the Rs 83 per litre mark for the first time in more than two years, after a rise in international oil prices forced the 13th rise in rates in the last quarter. According to the price notification of the oil marketing companies, the price of petrol on Saturday was raised by 27 paise per litre and diesel by 25 paise.

In Delhi, petrol prices rose from Rs 82.86 to Rs 83.13 per litre. From Rs 73.07 to Rs 73.32 per litre, diesel rates went up.

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This is the highest rate for petrol and diesel since September 2018 and followed the 13th rate increase since November 20, when, after almost a two-month hiatus, oil companies resumed the daily price revision.

Petrol prices have risen by Rs 2.07 per litre in 16 days and diesel prices have risen by Rs 2.86.

ICICI Securities said that hopes for vaccines are driving up oil prices.

Brent crude oil has risen by 34% from its lows at the end of October 2020, driven by the hope that COVID-19 vaccines will lead to a recovery of demand.

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“The increase in oil prices is despite the second Covid wave in Europe and the US (which has led to a reversal in demand recovery) and the increase in Libyan oil production from 0.1 million barrels per day (bpd) to 1.25 million bpd,” it said.

By deciding to increase output from January 2021 more modestly than previously agreed, the OPEC oil cartel plus its allies such as Russia (called OPEC+) are likely to ensure global supply deficits even in the first quarter of 2021. “Thus, until the vaccine boosts demand, OPEC+ has done its part to avoid supply surpluses,” it added.

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On December 4, Brent rose from USD 36.9 per barrel on October 30 to USD 49.5.

In the Q3-Q4 calendar year 2020, the IEA estimates the global oil supply deficit at 2.1-2.8 million bpd. However, if OPEC+, as agreed in April 2020, were to cut output cuts from 7.7 million bpd to 5.8 million bpd from January, a surplus of 0.4 million was likely in Q1 2021.

“We now estimate a supply deficit of 0.5 million bpd in Q1 2021 and 0.2-2.8 million bpd in Q2-Q4, however as OPEC+ decided to increase production by just 0.5 million bpd in January 2021 and by not more than 0.5 million bpd in later months and only after deliberations.”

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Petrol prices had been static since September 22 prior to the November 20 rate hike in India and diesel rates had not changed since October 2.

Oil marketing companies in the public sector – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) – review daily petrol and diesel rates based on international oil price benchmarks and foreign exchange rates.

However since the pandemic broke out in order to prevent volatility in retail prices, they have resorted to calibrating the rates.

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No change in rates between June 30 and August 15 and an 85-day status quo between March 17 and June 6 preceded the 58-day hiatus in the petrol price overhaul and the 48-day status quo on diesel rates.

In Mumbai, the price of petrol on Friday rose from Rs 89.52 to Rs 89.78 per litre, while diesel prices went up from Rs 79.66 to Rs 79.93.

Rates differ depending on the incidence of local sales tax or VAT, from state to state.

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