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MOSL: OIL AND GAS: Diwali bonanza | Centre cuts excise duty on petrol, diesel

OIL AND GAS: Diwali bonanza | Centre cuts excise duty on petrol, diesel

 

In the past one year, Brent crude oil has almost doubled to USD83/bbl. Given the government’s ambitious plan to divest its stake in BPCL, it broadly stayed away from interfering in the pricing of Auto fuels, despite growing voices against the continuous price hikes. This led to petrol and diesel prices touching record highs of INR110/liter and INR98/liter, respectively, in Delhi.

 

Rise in GRMs failed to enthuse investors

• After witnessing poor margins for almost three years (since Dec’18, barring a few instances), refining margins have started to trend higher to USD5.3/bbl in Sep’21, USD7.5/bbl in Oct’21 (refer Exhibit 3), and USD7.8/bbl in Nov’21 till date.
• The recent spurt in refining margins is on the back of lower refinery run-rates (refer Exhibit 6-8) in the US (as it recovers after the hurricanes), (planned maintenance shutdowns and carbon emission concerns), and India (expansion-related shutdowns), and a revival in demand.
• Indian refineries, which failed to see any benefits from rising GRMs, apart from huge inventory gains till now, will clock better GRMs on the back of an improvement in transportation fuel cracks (refer Exhibit 9-10).
• The current high GRMs would return to normal levels in the near term as the refinery run-rate improves, and winter season decreases demand for petrol in the West. We expect SG GRM to sustain around its long term average of USD5-6/bbl.