OMCs' improved marketing margins may see downward revision of fuel prices: ICRA

ICRA expects a revision of fuel prices if crude prices remain stable

Indian oil marketing companies (OMCs) are riding high on improved margins from the retail sales of auto fuels due to a significant drop in crude oil prices, according to rating agency ICRA, which expects a revision of fuel prices if crude prices remain stable.

The OMCs reported a consolidated net profit of Rs 27,295 crore in the second quarter of financial year 2023-24, returning to the black, recouping the losses they incurred from record-high oil prices last year. As of now, oil prices have been down by almost 18 percent since September.

"ICRA estimates that the OMCs’ net realisation was higher by Rs 11/litre for petrol and Rs 6/litre for diesel vis-à-vis international product prices in January 2024 (till January 19)," said Girishkumar Kadam, senior vice president and group head of corporate ratings, ICRA Ltd.

"The retail selling prices of these fuels have been unchanged since May 2022 and headroom for their downward revision may emerge if crude prices remain stable," Kadam added.

However, earlier this month, Union Minister of Petroleum and Natural Gas Hardeep Singh Puri said that there are no talks of fuel price cuts as energy availability is the government's priority amid high crude volatility.

According to energy experts, crude oil prices in the short term would be driven by lower-than-expected global demand and weak economic growth around the world, offsetting the impact of geopolitical tensions.

"The prices moderated in the last few months owing to tepid Chinese oil demand coupled with elevated production and inventory levels in the US, despite tightening supply, post the extension of supply cuts by the OPEC+," the rating agency added.