Fuel retail turns profitable for oil marketing companies

Fuel retail has turned profitable again for oil marketing companies as domestic prices stay frozen while international rates have softened.

Indian Oil, Hindustan Petroleum and Bharat Petroleum are estimated to have made an average margin of ₹1.2 per litre on the retail sale of petrol and diesel in the current quarter so far compared to a loss of ₹3 per litre in the October-December quarter and a loss of ₹8.9 per litre in the April-December period, according to ICICI Securities. In the third week of February, the average marketing margin on petrol and diesel is estimated to be ₹3.4 per litre.

Companies are estimated to have made a loss of ₹1.2 per litre on the sale of diesel in the current quarter so far. But a profit of ₹6.8 per litre on petrol has turned the blended margin on the two fuels positive, according to the brokerage.

The volume of diesel sold in the country is about two-and-a-half times that of petrol. Domestic rates of petrol and diesel haven't changed for nearly a year except to adjust for duty revisions.

The gross refining margins (GRM) for oil marketing companies, excluding any inventory impact and windfall tax, are estimated to be at $11-13 per barrel for the Jan-Feb period-$1-2 per barrel less than in the previous quarter-due to softer diesel and jet fuel spreads, according to the brokerage.

The positive marketing margins will impact the three oil marketing companies differently based on the marketing segment's weight in the earnings.