"The over-recovery (or profit) on High Speed Diesel (HSD) applicable for the 2nd fortnight of October effective from 16.10.2014 is now Rs 3.56 per litre. The over-recovery was Rs1.90 per litre during 1st fortnight of October 2014," the Petroleum Ministry said in a release here.

The daily international crude oil price of Indian basket dropped nearly USD 4 per barrel (bbl) on Wednesday at USD 83.85, against 87.46 on Tuesday, the statement added.

Lowering crude prices is the result of sluggish demand from major importers like China coupled with a rise in output from otherwise strife-torn Libya, as well as the easing of concerns over supplies from Iraq where various factions are engaged in military combat.

Global benchmark Brent crude oil futures have fallen steadily for almost four months, dropping 23 percent from a June high of over USD 115 a barrel as fears of a Mideast supply disruption ebbed, US shale production boomed and demand from Europe and China showed signs of flagging, the ministry said on Monday.

US crude stockpiles added five million barrels to 361.7 million barrels last week, according to data from the Energy Information Administration (EIA).

Crude production from the Organisation of Petroleum Exporting Countries (OPEC) averaged 30.47 million barrels per day, an increase of 402,000 barrels from the previous month, according to the OPEC monthly report released last week.

The OPEC basket price fell more than USD 4 last week to USD 89.34, marking its fourth straight weekly drop, according to Venezuelan government figures.

On Sunday, Gulf-nation Kuwait's Petroleum Minister Ali al-Omair said output cuts by OPEC countries would do little to prop up prices in the face of higher production from Russia and the United States.

Brent crude has averaged around USD103 since 2010, trading mostly between USD 100 and USD 120.

Petrol rates were cut effective on Wednesday by Re.1 a litre, excluding local taxes, following a reduction of 54 paise made on October 1.

After accounting for local sales tax, petrol per litre will cost in Rs.66.65 in Delhi, Rs.74.46 in Mumbai, Rs.74.21 in Kolkata and Rs.69.59 in Chennai.

Diesel prices were earlier being raised monthly by 50 paise a litre in line with the government's January 2013 decision, while September was the first month that passed without a hike.

Rates have cumulatively risen by Rs.11.81 per litre in 19 installments since January 2013. Diesel currently costs Rs.58.97 in Delhi, Rs.67.26 in Mumbai, Rs.63.81 in Kolkata and Rs.62.92 in Chennai.

While the government is keen to pass on the benefit of cheaper oil to consumers, it couldn't free diesel prices because of the assembly elections, an official source said.

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