A natural disaster in the U.S. and a mishap in Europe's largest refinery disrupted the crude oil supply leading to a rise in the Singapore gross refining margin (GRM).
Singapore gross refining margin, Asia's oil benchmark, is at one-year high of $10.5 per barrel, according to a Morgan Stanley report.
A higher GRM benefits oil marketers as they earn more for processing every barrel of crude. Every 10 percent rise in the refining margin has a positive impact of 8-12 percent on Reliance Industries Ltd. earnings, according to Morgan Stanley.
Singapore gross refining margin averaged around $7.9 per barrel so far during the quarter. This was 23 percent higher than the previous quarter's average of $6.4 per barrel.
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Hurricane Harvey on the Gulf Coast and a fire at Europe's largest refinery-Shell's Pernis refinery in Rotterdam led to a disruption supply in the second quarter of financial year 2018. This led to Deutsche Bank Markets Research upgrading its target price on Reliance Industries by around 4 percent to Rs 1,810.
Highlights
- FY18/19 earnings per share estimates hiked by 2 percent to factor in marginally higher refining
- Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding telecom is expected to grow at a compounded annual growth rate of 39 percent over FY17-19
- Commissioning of off-gas ethylene cracker, pet coke gassifiers and rise in average revenue per user of Reliance Jio to drive stock valuations
Shares of the Mukesh Ambani-led firm rose as much as 1.1 percent to Rs 1,630.35 apiece on the BSE. The company's stock gained for the fifth straight day.
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