- India’s fuel retailers are incurring heavy losses despite steady pump prices.
- Jefferies flagged under-recoveries of Rs 21/litre on petrol and Rs 28/litre on diesel.
- Rising crude costs and global disruptions continue to strain oil marketing comp
Despite steady retail prices, India's fuel retailers are incurring losses of Rs 21 per litre on petrol and Rs 28 per litre on diesel to maintain price stability amid global energy volatility, according to a Jefferies report cited by The Economic Times.
The report notes that despite recent government measures, including excise duty cuts, state-run oil marketing companies (OMCs) continue to face mounting pricing pressure. These "under-recoveries" pose a material risk to the quarterly earnings of India's leading fuel retailers.
ALSO READ | Worried About Inflation? Here's How To Make Your Investment Portfolio Future-Ready Amid Volatility
Jefferies highlights that end-February gains of Rs 9 per litre on petrol and Rs 2 per litre on diesel have reversed sharply, turning into current losses of Rs 21 and Rs 28 per litre, respectively. The rapid swing underscores the strain on OMCs as they seek to insulate consumers from global price volatility.
In a rare market distortion, Russian and Dubai crudes are trading at a premium to Brent, while LNG prices have surged nearly 85% amid ongoing regional conflicts. Jefferies analysts caution that this is not a short-term disruption; significant damage to energy infrastructure is expected to keep the global gas market under severe pressure through 2026-27.
The government's March 27 excise duty cut has also failed to fully offset the impact of elevated global refining margins. While the Rs 10 reduction offered temporary relief, refined fuel costs have climbed sharply amid heightened geopolitical risks.
Around 3.4 million barrels per day of global refining capacity-nearly 3% of total output-has been forced offline due to damage in the Middle East, further tightening supply conditions.
Meanwhile, Goldman Sachs has cut its Q2 Brent crude forecast to $90 per barrel from an earlier estimate of $99, following an 11% weekly decline driven by a ceasefire and a partial easing of the regional risk premium.
ALSO READ | Iran Conflict: FinMin Says No Change In Budgetary Projections Despite 'Covid-Like Disruption'
Probal Sen of ICICI Securities said price stabilisation, rather than a sharp correction, remains the most favourable outcome for India's energy majors. Crude holding near the $90-95 per barrel range would help avert the revenue shock typically associated with abrupt price swings, he told The Economic Times.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.