𝗖𝗿𝘂𝗱𝗲 𝗢𝗶𝗹 𝗣𝗿𝗶𝗰𝗲 𝗗𝗿𝗼𝗽 𝗧𝗼 𝗜𝗺𝗽𝗿𝗼𝘃𝗲 𝗢𝗠𝗖 𝗣𝗿𝗼𝗳𝗶𝘁𝘀
JP Morgan reports that declining crude oil prices will increase fuel marketing margins for India's state-owned oil marketing companies (OMCs).
Key facts from the report:
- Petrol and diesel margins at state refiners now exceed levels seen before the West Asia conflict.
- Lower crude prices and reduced central excise duties drive this margin improvement.
- Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation (IOC) will see the most benefits if crude prices stay low.
- HPCL margins have returned to or surpassed levels from before the price spike.
- LPG losses remain high but should decrease as oil prices fall.
- First-quarter earnings may remain low due to inventory losses from falling crude prices.
- Profitability should improve starting in the second quarter.
- JP Morgan expects stronger earnings in the December and March quarters if crude stays below $80 per barrel.
Risks and constraints:
- Rising debt levels affect company valuations.
- The government reduced excise duties on petrol and diesel by Rs 10 per litre in March.
- The government may restore fuel taxes as spending commitments increase over the next two fiscal years.
- Lower crude prices result in roughly Rs 1.8 lakh crore in lost annual revenue for the government.
- Future earnings depend heavily on crude oil prices and government tax policy.
Source: The Times of India