“Fitch expects core gross refining margins (GRMs) to moderate from the highs of 1QFY23 but remain close to mid-cycle levels in 2HFY23, benefitting from supportive supply and demand factors including changes in global trade flows and strong post-pandemic recovery,” Fitch said in a report.
In the June quarter, GRMs per barrel for
marketing companies (OMCs) widened substantially after the Russia-Ukraine conflict tightened supply, supporting the surge in crude oil prices. GRMs were also boosted by low-priced crude oil imports from Russia and the post-pandemic demand recovery.
Fitch also expects OMCs to incur large marketing losses in FY23 with continuing negative marketing margins as we expect crude oil prices to remain elevated until geopolitical tensions ease while rising inflationary pressure would prevent the OMCs from increasing fuel prices in the near term. “Nevertheless, OMCs may be able to recoup some of these losses when oil prices fall,” the agency said.
The demand outlook remains strong as the festive season in October should support demand in the second half of this FY23, although growth may slow due to the base effect, the American credit rating agency said.
Demand for key petroleum products rose by 14 per cent YoY in April-July due to a resurgence in economic activity, but also from a low base in FY22.
On additional levies on crude oil production and exports to tax windfall gains, Fitch said it will reduce the profitability of upstream producers, such as and Oil India.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)