How higher Crude prices impact Indian oil marketing companies - Explained
Hindustan Petroleum Corporation (HPCL), Indian Oil Corporation (IOCL) and Bharat Petroleum Corporation (BPCL) may remain volatile in the near term looking at uncertainties pertaining to the oil prices amidst geopolitical stress caused by Israel Hamas Conflict, said analysts. Brent that was $70-75 a barrel levels in June had risen to more than $95 a barrel by the end of September.
Though crude prices softened in the previous week ending 6th September, led by global slowdown concerns, however, have risen again by at least $4 a barrel amidst rising concerns on Israel Hamas conflict. Also read- From high inflation to import bill - the domino effect of rising crude oil prices on Indian economy The Crude oil prices that had continued to rise since June led by tightening of supplies by oil producers as Saudi Arabia and Russia already had been adding to concerns on their marketing margins.
Marketing margins are the margins oil marketing companies earn by selling fuel in the retail market. Since the retail prices have not changed much while input costs continued to rise due to higher crude prices, the pressure on margins was bound to be felt.
The blended marketing margins had slipped deep in the red (loss of ₹5.3 a liter) for OMCs by week ending September 24th as per Nomura Research. Though some respite must have been felt by OMCs during first week of October, however the rise in crude prices now again is adding to concerns Also Read- Petrol, diesel price hike unlikely despite crude oil price surge: Moody's The higher crude prices not only put pressure on marketing margins but also lead to a rise in working capital requirements since OMCs import crude oil to meet country's petroleum products demand.
Read more on livemint.com
