Oil, Gas Sector Check – Rising Crude, Weaker Indian Rupee Add To OMCs’ Woes: Nirmal Bang


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After showing signs of softening in the second fortnight of September 2022, losses on Indian oil marketing companies’ retail pump sales margins on motor spirit/high speed diesel in October 2022 have widened due to the recent rise in crude oil and weakness in Indian rupee – brent is up 5% month-on-month and U.S. dollar/Indian rupee rate in Oct-22 is at Rs 82.1 versus Rs 80.3 in Sep-22.

It is ironical that the above factors are eroding the potential gains in MS retail margins from the benign MS-crude spreads, which had turned negative in the last few days.

HSD-crude spread has rebounded to $37.9/barrel of oil, which has increased retail HSD losses from under Rs 4/litre in the second fortnight of Sep-22 to almost Rs 12/litre in first fortnight of Oct-22.

The shortage of diesel in Europe and low stocks are likely to worsen due to lower exports from China. This, along with strong jet fuel demand and persistent gas shortages are likely to result in gas being replaced with petroleum fuels to meet the rising power demand in Europe and the rest of the world.

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