OMCs will post strong profitability on a steep increase in refinery margins, with IOC expected to lead the field in Q2 results

 OMCs will post strong profitability on a steep increase in refinery margins, with IOC expected to lead the field in Q2 results

The second quarter of the current fiscal year (Q2FY24) is projected to see oil marketing companies' (OMCs') earnings decline from record highs reached in the first quarter, although they are still predicted to be strong due to a steep increase in gross refinery margins (GRM). 

According to a research by JM Financials, the severe effect on marketing segment profits resulting from higher international oil prices is projected to cause Q2 earnings of OMCs to decline from the record high in the April-June quarter. However, excellent gross refinery margins (GRMS) and considerable inventory gains are still anticipated to contribute to impressive Q2 performance.

In the three months from July to September, the price of crude oil increased by as much as 30% due to a reduction in supply caused by Saudi Arabia and Russia's output announcements. However, despite the increase in the price of Brent oil, the domestic brokerage predicts that the reported GRMs (including inventory gains) of OMCs would increase significantly by $14–19 per barrel in the September quarter.

A solid quarter is predicted by brokerage company Motilal Oswal, which also believes that OMC profitability may increase to $26,200 billion in Q2FY24 from a loss of $2,700 billion in Q2FY23 due to high marketing margins.

But according to a recent analysis from Moody's, India's three state-run OMCs, Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), and Indian Oil Corp (IOC), all of which have Baa3 ratings, would be less profitable due to rising crude oil prices.