Summary:
- Following Q1FY25, there was a consecutive downward trend in the price of crude oil on a quarterly average basis. Despite a significant increase in January 2025, CareEdge Ratings anticipates that Brent crude oil prices will remain in the between $75 and $80/bbl on average over the following six months. The new US government’s plan to increase crude oil output, the OPEC nations’ continued mostly stable production levels, and the absence of any disruptions in the Russian crude oil supply are expected to be the key drivers of this. On the other hand, given the recession in the main world economies, demand growth is anticipated to be very muted.
- The Gross Refining Margins (GRMs) of Indian Public Sector Oil Marketing Companies (OMCs) softened during 9MFY25 to an average of $4.80/bbl, down from $11.75/bbl in FY24 and $17/bbl in FY23. This was mostly because there were fewer deals available for obtaining Russian crude oil and fewer products available.cracks, particularly diesel, which had earlier increased significantly following the conflict with Russia and Ukraine.In the upcoming six months, CareEdge Ratings anticipates that the GRMs of Indian PSU OMCs will stay between $4 and $6/bbl.
- Fuel retailers’ blended retail margins on petrol and diesel have improved significantly in Q3FY25, reaching almost Rs 9/litre, thanks to a drop in crude oil prices and a moderating trend in OMCs’ GRMs. Since we anticipate that crude oil prices won’t rise much and that GRMs will continue to be range bound,We anticipate that the blended retail margin will be strong over the next six months, hovering around Rs 7-9/litre. This would allow us some room to rationalise the retail pricing of petrol and diesel, which have been static for a long time.