Reliance Industries Ltd., which saw its second quarter earnings of fiscal 2025 impacted by weak performance from the oil-to-chemicals segment, expects the fuel market to further tighten in the near term.
The company expects the global oil demand growth to be less than 1 million barrels of oil per day in 2024 and 2025 after witnessing a demand of 2.1 mbpd in 2023, Chief Financial Officer V Srikanth said in an analyst call.
Srikanth said weak refining margins would lead to cuts in refinery throughput in Europe and Asia in the third quarter of the fiscal year.
However, the weakness will be offset by robust growth in global jet fuel demand. Jet fuel is expected to grow by 0.46 mbpd in the third quarter of the current fiscal, according to the CFO. "Asia, mostly China, will contribute 70% to this growth."
There will also be an expected surge in the demand for heating oil during the winter months, he said.
RIL reported its second quarter results, with a net-profit rise of 11% to Rs 19,323 crore for the quarter ended September 2024. This profit figure aligns with the consensus estimates of analysts polled by Bloomberg.
Also Read: Q2 Results Updates: RIL Revenue Flat At Rs 2.31 Lakh Crore; Reliance Jio Net Profit Up 14%
Challenges
The company has cautioned that escalation in geopolitical conflicts and change in OPEC+ policy regarding reversal of increasing crude oil production would keep the crude oil price volatile in the coming quarters.
The margins may also be suppressed by new refinery capacity additions and old ones returning from maintenance leading to oversupply and glut situation in the market.
As far as exports of downstream products from India are concerned, they would be impacted by weak demand from the US and European Union, Srikanth said.
RIL had made substantial margins in the years following Russia's invasion of Ukraine, as it exported refined products made from discounted Russian crude to the US and EU. However, the discounts have dropped substantially now and demand has fallen on weak global economic conditions, leading to a drop in O2C financial performance.
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