A rally in crude oil prices, post the historic output cut deal struck by OPEC (Organization of Petroleum Exporting Countries) members last week is expected to lead to a 5-8 percent increase in petrol and diesel prices, a report from CRISIL Research indicates.
CRISIL expects Brent crude prices to rise to $50-55 by March 2017, which in turn will push petrol prices to as high as Rs 75-80 and diesel prices to as high as Rs 68 per litre. The report lays emphasis on the implementation of the OPEC agreement for the rise in prices.
High Prices = Improved Profitability?
The report expects India's state-run refiners to post improved profitability in the third quarter driven by inventory gains. It further adds that these gains will improve the companies' gross refining margins (GRMs) to $6-7 per barrel as compared to $3.8 per barrel in the second quarter.
The fourth quarter, though, may see a reversal in high profit numbers as the procurement costs would be elevated, with volume growth continuing to drive the company's revenue numbers for the long-term, the report adds.
The Demonetisation Impact
CRISIL does not foresee any significant impact of the cash crunch following the government's demonetisation drive, apart from the usual curb in consumption due to temporary slowdown in economic growth. The report expects things to normalise once currency circulation returns to normal levels.
OMCs In 2016
- Hindustan Petroleum (up 57.19 percent YTD)
- Bharat Petroleum (up 37.24 percent YTD)
- Indian Oil Corporation (up 38.53 percent YTD)
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