Oil marketing companies including public sector majors Indian Oil Corp., Hindustan Petroleum Corp., and Bharat Petroleum Corp. are incurring a loss of Rs 20 on sale of every litre of petrol and diesel, according to analysts.
The gross marketing margin, the difference between the retail selling price of fuels and the cost to procure and deliver them, is negative. The OMCs are facing the double of whammy of higher international crude oil prices and a weaker rupee.
The INR has depreciated 2% against the US dollar so far this year, while the benchmark Brent crude price has surged 33% to above $80 per barrel.
Shares of HPCL, BPCL and IOCL fell from their day's high after the news o Thursday.
The profitability of OMCs is inversely tied to global crude spikes. For every single dollar increase per barrel of crude, these companies suffer Rs 0.5 per litre decline in gross marketing margins. If crude sustains above the $80 threshold, their normal margins of roughly Rs 3.5 per litre face total collapse, deeply impacting their overall financial health.
Oil prices shot off earlier this week after the United States and Israel launched a joint air offensive against Iran. The Islamic Republic retaliated with missile and drones strikes across the Gulf after the killing of Supreme Leader Ayatollah Ali Khamenei.
Markets have been worried over energy supply from the Middle East as Iran has targeted oil facilities in key regional producers and threatened to disrupt shipping in the narrow Strait of Hormuz that connects the Persian Gulf with the Arabian Sea. India imports roughly 2.5–2.7 million barrels per day (bpd) — accounting for around half of the country's total oil imports — from Iraq, Saudi Arabia, the UAE, and Kuwait.
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