Oil marketing companies eye a strong Q3, but LPG could be a dealbreaker
Subscribe to enjoy similar stories. State-run oil marketing companies (OMCs) are set for a better December quarter (Q3FY25) after seeing earnings drop sharply year-on-year in the first half of the fiscal year. Amid healthier demand for crude oil and refined products in November, largely stable crude prices improved refining and marketing margins.
OMCs include Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL) and Indian Oil Corp Ltd (IOCL). Analysts estimate an almost 40% sequential rise in Singapore gross refining margin (GRM) in Q3 at $5 a barrel, against $3.6 a barrel in Q2. The figure almost tripled to $6 a barrel in November from the lows of $2.1 a barrel in September, according to ICICI Securities.
Also read: Godrej Consumer’s profit warning intensifies gloom in FMCG sector Singapore GRM is often considered a proxy for refining margins in the Asia-Pacific market. “Around $4-5 a barrel of Singapore margin is something that seems to be sustainable. However, these are not top-of-the-cycle margins, but more like a mid-cycle margin environment that we expect over the next few weeks," Probal Sen, vice president of equity research at ICICI Securities said.
“Moreover, whatever little Russian crude is coming through the system is an added benefit for the OMCs." Recall that higher discounts on Russian crude oil were instrumental in pushing up gross refining margins (GRMs) of OMCs in the September quarter (Q2) of FY24. However, in Q2FY25, GRMs of OMCs fell sharply owing to lower discounts, the falling share of Russian crude, heavy inventory losses and a higher-than-expected slump in demand. Coupled with aggregate losses worth ₹7,800 crore from LPG under-recoveries, OMCs’ net profit fell as much as 86% in
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