With international crude oil prices falling below $60 per barrel on Thursday, there is a high possibility of oil companies reducing prices of diesel and petrol.
On June 30, oil companies had cut petrol prices by 31 paise a litre and diesel by 71 paise per litre following a decline in crude oil prices.
Brent crude oil prices traded at $58 per barrel on Thursday, down over 16% compared to the levels seen in early June.
The decline in oil prices intensified this week due to growing concerns over Greece debt, crash in Chinese stock markets and expectations that Western powers could finally strike a deal with Iran on its nuclear programme. Further, a strengthening dollar is also seemed to have hit global oil prices.
Besides, oil prices have been pressurized by oversupply issues since June last year. Analysts expect oil prices to trade lower in the coming months due to weak fundamentals.
Greek voters rejected the bailout conditions set by the country's creditors in the referendum held on Sunday and increased the chances of country's leaving the eurozone.
The contagion from Greek exit is expected to hit growth in other countries in the region, thereby reducing the demand for oil.
Chinese equity markets have been witnessing high volatility since mid-June. The benchmark Shanghai Composite Index declined by about 30 percent, as investors thought that a bull run will start fading, having lasted for one year. The sell-off is partly led by slowdown worries.
A further decline in China's growth is likely to weigh on oil prices, as it accounts for a significant share of global oil demand.
A rebound in US oil production seen recently will also drag oil prices in the coming months; US oil drillers had long kept their oil rigs idle owing to falling prices.
In addition, an interest rate hike by the US central bank in the near future is expected to bring oil prices down, as a strengthening dollar is negative for oil markets.
However, the rupee is unlikely to feel much impact from an appreciating dollar, taking into account an improvement in India's economic fundamentals.