Over 40% Surge In Margins Of Oil Marketing Firms Give Hopes For A Cut In Fuel Prices

This optimism is further bolstered by a significant rise in the average marketing margins of state-run oil marketing companies—Hindustan Petroleum Corp., Bharat Petroleum Corp. and Indian Oil Corp.—in the second quarter of fiscal 2025 as compared to Q1.

The OMCs saw their marketing margins for diesel rise 46% in Q2FY25-to-date to Rs 5.10 per litre versus Q1FY25, said Sumit Pokharna, vice president and senior oil sector analyst at Kotak Securities Ltd.

The petrol margins were up by 88% for Q2FY25-to-date to Rs 7.30 per litre compared with Rs 3.9 per litre in Q1FY25, Pokharna said.

The increase in marketing margins is likely to stay that way till the crude oil prices stay below $75 per barrel and fuel cracks stay higher, said Ashwin Jacob, partner and energy lead at Deloitte India.

He added that it is likely that the government may pass on the benefits to the consumers in the form of a cut in retail fuel prices in the range of Rs 2-3 per litre, possibly before the assembly elections in Haryana, Maharashtra, and Jharkhand this year.

Jammu and Kashmir is also going to polls after a break of 10 years in three phases from Sept. 18 to Oct. 1.

Despite the drop in Brent crude oil price to a three-year low of $69.7 per barrel, the price is expected to remain in the $70–75 per barrel range.

On Wednesday, the real time price of Brent crude oil was $70.39 per barrel, up by 0.99% over the previous close.

The demand in India is stable and growing. The country has imported around 232.31 million tonne crude oil in FY24 and this is likely to grow in FY25 on the back of higher industrial and economic growth.

However, the global slowdown—primarily in China—and fears of recession in the U.S. will keep the prices under check, even if OPEC+ reverses its plans to increase crude oil production.

“I am not worried about the drop in crude oil supplies but slowdown in demand; if it continues, India will not remain immune to the global slowdown,” Pokharna said.

According to experts, every drop in the price of crude has a positive impact on India’s crude import bill.

In FY24, India’s crude oil import bill was $132 billion for 232.31 million tonnes of crude. If the price of crude drops by $1 per barrel, the import bill for the same amount of crude would fall by $1.7 billion or Rs 14,110 crore in FY25, said Jacob.