Elevated crude prices squeeze OMCs' retail fuel margins despite strong refining gains: Report
New Delhi, Jul 20
Rising global crude oil prices have sharply eroded the retail fuel marketing margins of India's oil marketing companies, even as a strong surge in refining crack spreads continues to support overall integrated profitability, according to the latest weekly sector update by Equirus Securities.
The report said Brent crude climbed 5.4 per cent week-on-week to USD 88.1 per barrel, while the Indian crude basket rose 2.5 per cent to USD 81.4 per barrel. The increase in crude prices weighed on fuel marketing margins, particularly diesel, where retail losses deepened.
Highlighting the pressure on fuel retailing, the report said, "Petrol marketing margin fell sharply WoW (-42.1%) to Rs 4.5/lit, while diesel MM slipped further into red to Rs-20.4/lit (from Rs-15.4/lit last week)."
However, the deterioration in retail margins was partly offset by a sharp improvement in refining economics. Gasoline crack spreads increased 15.8 per cent week-on-week to USD 27.3 per barrel, while gasoil and jet fuel cracks climbed to USD 65.2 per barrel, reflecting continued tightness in global refined product markets.
According to the report, "Gasoline crack rose 15.8 per cent WoW to USD 27.3/bbl (up 3.4 over 3M) and remains ~69 per cent above last 1 yr avg. level; Gasoil crack rose 12.5 per cent WoW to USD 65.2/bbl and is ~99 per cent higher than 1 yr avg., diesel continues to lead product strength also on back of Russian exports ban."
Despite weaker retail fuel earnings, integrated margins, which combine refining and marketing performance on a 1:1 basis, remained elevated compared with historical levels.
Petrol integrated margins eased 4.3 per cent week-on-week to Rs 21 per litre, while diesel integrated margins declined 2.5 per cent to Rs 19.1 per litre. Even so, these margins remained significantly above both three-month and six-month averages.
The report said, "Integrated margins (assuming 1:1 refining: marketing) eased WoW (petrol -4.3 per cent to Rs 21.0, diesel -2.5 per cent to Rs 19.1) but remain well above 3M levels (petrol +58.7 per cent, diesel +34.6 per cent) and 6M levels (petrol +108.9 per cent, diesel +239.1 per cent)."
Equirus also noted that robust refining margins are being driven by constrained global supplies of refined products, supported by Russia's diesel export restrictions and geopolitical tensions in West Asia.
It said elevated diesel cracks should continue to provide earnings support to refiners over the next one to two quarters, although such exceptional margins are likely to normalise once refinery utilisation improves and product inventories are rebuilt.
— ANI
Reader Comments
It's concerning that diesel marketing margins are negative Rs 20.4 per litre. The government really needs to step in to stabilize fuel prices for consumers. Global factors are hurting us badly, but we need better policies.
Bhai, Russia ka export ban aur West Asia ki tension sach mein bada issue hai. Lekin OMCs ka integrated margin Rs 21 per litre hai toh ketna profit bana rahe hain? 😅
Interesting how the refining margins are compensating for retail losses. The global supply situation must be really tight if gasoil cracks are up 99% from last year's average. This won't last forever though.
Haan, global factors toh hain hi, lekin domestic policy mein bhi kuch kami lagti hai. Hum common aadmi ko toh har jagah petrol ka bojh uthaana padta hai. Integrated margin high hone ka matlab OMCs ko fayda ho raha hai, humein nahi. 🙄
As an economist, this is a classic example of how volatile global energy markets impact India. The refining gains are temporary, but the retail pressure is structural. We need to accelerate renewable energy adoption. Just saying!
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