Global crude oil prices fell to $58.50 a barrel on Tuesday, the lowest since May 2009, amid signs of slowing factory activity in China, the world’s second-largest economy and a major oil consumer.
India is a keeping a close watch on oil price movements. Falling prices are good for India, which imports nearly two-thirds of crude oil requirements as it will cut companies’ import bill, enabling them to reduce retail prices of petrol and diesel.
A sliding rupee, which has fallen by Rs 1.24 in the last two days, however, could partially offset the gains.
Oil companies reduced petrol and diesel prices by Rs 2 a litre from Tuesday after the Organisation of Petroleum Exporting Countries (OPEC) reiterated its decision to not cut output.
Since August, petrol has become cheaper by Rs 12.27 a litre and diesel by Rs 8.46 a litre.
Wholesale inflation rate fell to 0%, the lowest since (-)0.3% in July 2009, helped by falling vegetable and fuel prices. Retail inflation stood at a three-year low of 4.4% in November.
A cut in transport fuel prices could ease inflation further, building a strong case for RBI to cut interest rates.
Domestic oil industry sources said petrol prices could fall below Rs 60 a litre if the slide continues.