Q1 Result preview: OMCs to report sharp rise on over-recovery with crude below $80/bbl; check details
Reliance, Indian Oil, among others, in the first quarter of current fiscal (2023-24) is expected to go up sharply due to auto-fuel over recovery in the range of ₹17,000-18,000 crore. According to a report by JM Financials, the over-recoveries registered by OMCs in the April-June quarter is on the back of consistent retail prices of petrol and diesel, despite the moderation in crude prices which have been below $80 per barrel, to recoup FY23 losses.
OMCs did not significantly increase retail prices last year even after crude reached a peak of $140 per barrel in March 2022. Due to this, the oil refiners registered losses as petrol and diesel rates have been unchanged since May 2022.
For consumers, petrol and diesel prices may not reduce even after crude oil prices decline further this year as OMCs may not lift the freeze on fuel prices. OMCs’ weighted average auto-fuel gross marketing margin has jumped sharply to a record high over ₹8.8 per litre in Q1FY24, compared to ₹2.1 per litre in the preceding Q4FY23, versus the normalised margin of ₹3.5 per litre, as per JM Financials.
However, the reported gross refining margins (GRM) after the inventory loss is likely to moderate to $8-11 per bbl, with Hindustan Petroleum Corp Ltd (HPCL) at $8.4/bbl, Indian Oil at $8.7/bbl, and Bharat Petroleum Corp Ltd (BPCL) at $10.4/bbl, despite the moderation in diesel cracks, according to the report. Meanwhile, the sales of petrol and diesel by state-owned fuel retailers in June were little changed from May, according to recent official data.
The daily sales of diesel rose marginally by 0.4 per cent to 7.12 million metric tonnes (mmt) in June compared with May, whereas petrol sales remained flat at nearly 2.90 million tonnes. State-run HPCL,
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