Russia's share in India's total crude-oil import bill hit a nine-month high of 40% in April as discounts from Moscow narrowed. CareEgde Ratings expects the gross refining margins of Indian refiners to moderate in financial year 2025 in the range of $6–8 per barrel as product cracks, especially for diesel, reduces.
Gross Refining Margin
Gross refining margin is a gauge for the refining-segment profitability. It reflects the difference between the total revenue generated from refining operations and the cost of purchasing crude oil. A higher GRM suggests better profitability, while a lower GRM indicates tighter margin.
After enjoying supernormal GRMs at an average of $16–18 per barrel in fiscal 2023, it moderated to an average of $10–12 per barrel in the last fiscal in line with CareEdge's expectations. The moderation was on the back of narrowing Russian crude discounts, along with a reduction in product cracks.
The ratings agency expects a further reduction to $6–8 per barrel on account of the same factors that impacted the margin in fiscal 2024.
Marketing Margins
Despite the moderation in the GRMs in fiscal 2024, the top three oil marketing companies saw profit jump multifold. This was on the back of higher marketing margin due to the unchanged prices of motor spirit and high-speed diesel.
In mid-March 2024, the Indian OMCs cut their petrol and diesel prices by Rs 2 per litre each after keeping prices unchanged since April 2022. This price cut is expected to moderate margin, especially in the first quarter of fiscal 2025.
Since crude prices are expected to have an upward bias in the near term due to the west Asia tensions, marketing margins are expected to remain pressure in the current fiscal, according to CareEgde.
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