Moodys released new report, petrol and diesel prices will not increase despite the rise in crude oil prices

Moody's Investors Service said in its report that there will be no change in petrol and diesel prices even after the increase in crude oil prices. Mango is going to be chosen in the country next year.

Fuel-owned fuel retailers in the country have decided to keep petrol and diesel prices stable for 18 months. The country's fuel retailers include Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL). It controls about 90 percent of the market.

In August this year, there has been an increase in oil prices in the international market. After this, the margin of retailers has become negative again.

Moody's said in its report that high crude oil prices would reduce the profit of three government-owned oil marketing companies IOC, BPCL, and HPCL in India.

The marketing margin of OMC has reduced considerably the difference between their net real prices and international prices. The marketing margin on diesel has become negative since August, while the margin on petrol has reduced considerably in the same period as international prices have increased.

Moody's said the cost of raw materials increased by about 17 percent to more than US $ 90 per barrel in September, which was an average of $ 78 per barrel in the first quarter of FY 2024. With the expansion of the cut in production of about 1 million barrels per day by the Petroleum Exporting Countries' Organization (OPEC), an extended export cut of about 300,000 barrels per day to Russia has increased oil prices.

However, high oil prices are unlikely to last long due to weakening global growth.

The decline in OMC's marketing margin has been reduced to some extent by an increase in gross refining margin (GRM). The closure of the planned refinery disrupted the supply of petroleum products in the area. '

The rating agency hopes that the international prices of GRM and transport fuel will be softened in the subsequent quarters as the demand has decreased due to concern over China's economic recess She is back online.

The report stated that a shorter difference between international and domestic prices will reduce OMC's marketing deficit. Still, their overall profitability will be weak as retail sales prices are likely to remain unchanged.

After a very strong income in the April-June quarter, OMC's operational performance is expected to weaken over the next 12 months as oil prices remain at the current high level. Nevertheless, the financial year 2024 (April 2023 to March 2024) of the three companies will be stronger and higher than the historical level, even though the financial year 2024 Crude oil prices in the second half will be 85 US dollars per barrel to 90 US dollars. Stay at the level.

Moody's said that OMC is responsible for the exceptionally strong earnings in the first quarter of FY 2024. In the first quarter alone, the EBITDA of the three companies was close to their average annual EBITDA of the last few years. ”In the second half of FY 2024, crude oil prices would be deficit when the prices rise around US $ 100.

Strong marketing margins for petrol and diesel promoted strong operating performance in the first quarter of FY 2024.

The rating agency stated that out of three OMCs, IOCL and BPCL are in better positions to withstand any more increase in crude oil prices than HPCL.

Strong income in the first quarter of FY 2024 and low crude oil prices compared to FY 2023 have reduced OMC's working capital requirements and allowed them to reduce their borrowings in the last few months. Meanwhile, earlier this year, the capital support of the Government of India for the OMC's capital support for the oil marketing sector in the budget will promote cash flow for OMC, and partially their capital expenditure needs will be met. For this effect, IOCL and BPCL have already announced the rights issue to the government.

Regarding this, Moody's said that although he has not included it in his estimates the time and quantity of such income remains uncertain at this time.