Oil Companies See Significant Increase In Q3 Marketing Margin, Says ICRA

Oil marketing companies have experienced a significant rise in marketing margins in the third quarter of the current financial year, according to ICRA Ltd.

The OMCs have achieved increased net realisations, with approximately Rs 11 per litre higher for petrol and about Rs 6 per litre higher for diesel, compared to international product prices, according to a report by the local rating agency.

The enhanced margin persists even as the diesel marketing margin entered negative territory during the quarter ended December, the credit rating agency said.

There had been a substantial recovery in petrol marketing margin following a significant drop last September, the report said.

Diesel marketing margin, which reached a negative value of Rs 1.4 per litre in October, bounced back and turned positive again in November.

ICRA underscored that a combination of reduced Chinese oil demand, increased U.S. oil production, and elevated inventories despite the supply cuts by the Organisation of the Petroleum Exporting Countries led to a global moderation in oil prices.

The synergy of these global price dynamics and revisions in the special additional excise duty in India has positioned domestic product prices advantageously for the OMCs in comparison to international product prices, according to the report.

ICRA maintains a positive outlook on the refining and marketing sectors, projecting a stable scenario. The agency expects a 3–4% growth in petroleum, oil and lubricant consumption for the next fiscal, driven by economic factors, and an uptick in mobility and air travel.

India's refining capacity is also slated to increase from 254 million tonne per annum as of December 2023 to 306 MTPA by fiscal 2028, ICRA said.

The top oil marketers are expected to lead this domestic refining expansion, which is poised to support the escalating consumption demand and cater to the country's petroleum product export requirements in the future, it said.