Lower GRMs amid high crude price may drag down performance of state-run OMCs

On March14, Indian refiners had slashed diesel and petrol prices in the country by Rs 2 per litre.

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26 Aug, 2025 12:21

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State-run oil marketing companies (OMCs) are expected to be impacted by the decline in Singapore gross refining margins (GRM), which have fallen below $4 per barrel, a double whammy to companies amid elevated crude oil prices.

Analysts say the current slump in GRMs is primarily due to high crude oil prices on account of geopolitical tensions without any major demand growth of petroleum products. “Nothing has changed as much as diesel demand is concerned, what has happened is input costs have gone up in a short span. The reason why diesel spread has collapsed can partly be explained by this lag and partly due to inventory ramp-up in the US. Both diesel and ATF spread has seen a 7-8 percent decline,” said an analyst on condition of anonymity.

“When crude prices rise because of supply concerns and not demand, it does not necessarily reflect in product prices. What is happening currently is there has been a spike in crude prices due to worries of security of supplies and the geopolitical conflict between Iran and Israel and it spreading to rest of the Middle-East region,” the analyst added.

Singapore GRMs have fallen below $4 per barrel in April—lowest since October 31—compared to around $10 per barrel in February, highest so far in 2024.

“Throughput has been high as very little maintenance activities are going on right now. Travel is very minimal due to seasonal reasons, so jet kero cracks have plummeted. On the diesel side, markets are well supplied due to which diesel cracks have also declined,” said Prashant Vasisht, VP & Co-Head, Corporate Ratings, ICRA.

Indian OMCs—Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL)—are expected to be hit amid a slump in refining margins. This comes as the companies are already reporting under-recovery on the sale on diesel.

“For the OMCs, they would be impacted as they are already making losses on marketing of diesel. Earlier, they had high GRMs to compensate partly for losses on marketing. But now refining side has also become weaker because of drop in crack spreads and GRMs,” said Vasisht.

On March 14, Indian refiners had slashed diesel and petrol prices in the country by Rs 2 per litre as crude prices stabilised around $80 per barrel. However, crude oil prices have gained momentum since then with the ongoing geopolitical crisis. So far in 2024, crude oil prices have remained elevated due to tighter supply, shipping risks and attacks by Ukraine on Russian energy infrastructure. Oil prices gained 16 per cent in the first quarter of 2024.

Performance of OMCs remain in focus amid decline in GRMs and soaring crude oil prices. Indian Oil is set to announce fourth quarter results on April 30 while HPCL would report the same on May 9. BPCL is yet to set a date for announcement of its Q4 and full-year results.