Relief for refiners: Crude oil import price drops below $100 in 1st week of August

India’s average crude oil import price in the first week of August fell below $100 to $99.75 a barrel for the first time after rising sharply in March (112, $87) after the Ukrainian war, and peaked at $116.01 in June.

The development has brought some relief to refiners who are suffering huge revenue losses on the sale of gasoline and diesel in the domestic market, but no immediate reduction in the pump prices of automotive fuels is in sight, as state oil companies are still bleeding heavily on the sale of diesel. , said two people familiar with the development, asking not to be named.

According to official data, India’s average benchmark gasoline price in the first week of August fell 27% to $108.78 a barrel from June’s average monthly peak of $148.82. the barrel. The average diesel price, which was $170.92 a barrel in June, also fell 24% to $129.72 in the first week of August.

One of the people mentioned above said that while the loss of revenue on the sale of gasoline was almost nil, diesel was still sold almost 10 per liter below the market price. In addition, state-owned companies must recoup their past revenue losses on the sale of automotive fuels as they halted any fuel price hikes over the past four months.

Although the public sector companies – Indian Oil Corporation (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) – are free to align pump prices for petrol and diesel with their respective international benchmarks, the government tacitly controls fuel prices for economic and political reasons.

IOC, BPCL, HPCL and the oil ministry did not respond to an email query on the matter.

The three state-owned companies that control more than 90 percent of domestic fuel trade have suspended their daily pricing policy and frozen pump prices for gasoline and diesel since April 7 amid rising inflation.

This had an impact on their results. IOC, India’s largest refiner, recorded a net loss of 1,993 crore in the first quarter of the current fiscal year after posting a record net profit of 24,184 crores in 2021-22 and a net profit of 5,941 crores in the first quarter of the prior year.

HPCL announced its largest quarterly net loss on Saturday at 10,196.94 crore in the first quarter ended June 30, 2022 versus net profit of 1,795 crore in the same period a year earlier due to a freeze in auto fuel prices, according to the company’s filing with the exchange.

The other public oil marketing company, BPCL, announced a net loss of 6,290.80 crore in the first quarter of 2022-23 on Saturday compared to the “restated” net profit of 3,192.58 crores in the same quarter last year.

Commenting on the company’s financial performance, BPCL Chief Financial Officer Vetsa Ramakrishna Gupta said: “Despite the robustness of GRM [gross refining margin]the company recorded a net loss in the first quarter due to heavy losses in marketing activities.

A second person mentioned above said that fuel retailers are still cautious about the volatility of oil prices in the international market. “Global oil prices have fallen on demand concerns, but this gain may be temporary. We have to see the trend for a few weeks before concluding that international fuel prices have actually come down,” said the person working at one of the state oil companies, asking not to be named.

Amid tighter monetary policies in major economies, recession fears in the UK and signs of weak demand in China, benchmark Brent crude closed Friday at a multi-month low of $94.92. the barrel.

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