Moneycontrol Bureau
Deutsche Bank has reiterated its preference for oil marketing companies (OMCs) over upstream companies after the oil retailers passed on rising crude price cost. It expects oil retailers to benefit from robust refining margins, capacity expansions, higher fuel marketing margin and consumption growth.
Amidst investor skepticism, Deutsche Bank estimates that with the current price hike, the oil retailers (HPCL, BPCL, IOC) have fully passed on the change in international petrol (gasoline) and diesel prices.
It also estimates that OMCs are earning a gross marketing margin of Rs 1.8 per litre on gasoline as well as on diesel, which is higher than in FY16.
The brokerage house expects auto-fuel marketing margin to remain elevated and factor gross auto-fuel marketing margin of Rs 1.6 per litre in FY17 against Rs 1.4 per litre in FY16, Rs 1.6 per litre in Q2FY17 and Rs 1.7 per litre in Q3FY17.
The oil marketing companies have raised gasoline price by Rs 1.66 to Rs 70.8 per litre and diesel price by Rs 1.14 to Rs 57.9 per litre.
Brent crude price rose 3 perent to USD 54.8 a barrel in the last fortnight from USD 53.4/bbl. The Indian rupee appreciated marginally against the US dollar to 67.9 in the last fortnight (against 68.1 earlier).
With these price hikes the oil marketing companies have now raised price of petrol by Rs 4.5 per litre and of diesel by Rs 3.25 per litre over the last 2 fortnights. They have also raised subsidised LPG price by Rs 2 to Rs 434.71 per cylinder and subsidised kerosene price by 26 paise to Rs 18.28 per litre, underlining the government's intent to pursue petroleum pricing and subsidy reforms beyond auto-fuels.
Posted by Sunil Shankar Matkar
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