New Delhi
A report on Thursday, highlights that stable retail fuel prices amidst volatile oil prices will bolster returns for the oil industry. Operating profits are projected to remain above $9-11 per barrel on average through fiscal 2024.
Oil marketing companies (OMCs) are expected to see operating profits decline to $12-14 per barrel in fiscal 2025, down from $20 per barrel previously. This dip is attributed to factors like softening diesel spreads, reduced discounts on Russian crude, and inventory loss impacts, with crude prices averaging $75 per barrel, down from $82.
The gross refining margins (GRMs) are experiencing a steep correction, anticipated to average $3-5 per barrel, as refinery production increases globally while consumption slows.
Despite these challenges, overall returns will benefit from marketing margins projected at Rs 4.5 per litre (about $9 per barrel), assuming no cuts in retail fuel prices. OMCs earn from refining and marketing; while oil prices fell 11% year-on-year to $83 per barrel in fiscal 2024, inventory fluctuations minimally affected the reported GRM of $12 per barrel. High core margins were maintained due to significant diesel spreads driven by geopolitical uncertainties.
Stable retail fuel prices resulted in healthy marketing margins of Rs 4 per litre, contributing to an overall profit of $20 per barrel. Estimated cumulative cash accrual for OMCs stands at Rs 52,000-54,000 crore, partially supporting a planned capital expenditure of Rs 90,000 crore.
