$100 Crude Oil Prices Slam India's OMC Margins
Crude oil prices have surged past $100 a barrel, and this is expected to negatively impact marketing margins for Indian Oil Marketing Companies (OMCs) in September. According to ICICI Securities estimates, petrol and diesel marketing margins will turn negative at 7.4 per litre and 10.3 per litre respectively.
However, the broker notes that gains realised during the previous two months are likely to support earnings for the OMCs in the quarter. In June, marketing margins were severely impacted due to higher crude prices and freight costs, but a sharp drop in crude prices in July helped auto-fuel marketing margins recover sequentially.
The impact of increased auto-fuel prices announced in May is also expected to support OMC marketing margins in the September quarter. Strong refining margins are seen as a key cushion against the deterioration in retail fuel margins, with Singapore Gross Refining Margins (GRM) averaging $24.5 per barrel during April-August.
Emkay Global Financial Services expects OMC margins to improve substantially to around 9-14 per litre in the current quarter, compared with 1-3 per litre in the June quarter. The three OMCs - Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation - reported net losses in the June quarter amid suppressed marketing margins.