Indian Oil Corp (IOC), the country’s largest fuel retailer, is looking at improved growth in earnings in the third quarter ending December 2020 on the back of high inventory gains on the back of a rise in the crude oil prices.
The oil price surge from the lows witnessed in end October 2020 has hit both the Gross Refinery Margins (GRMs) and auto fuel net marketing margins which may fall to below Rs 1 per liter in January 2021, according to brokerage firm ICICI Securities.
“However, it would lead to large inventory gains, which would mean strong earnings growth for IOC even in third quarter of 2020-21,” the firm said in a report. “We estimate product inventory gain at Rs 14.6 billion and crude inventory gain at $0.8 per barrel for IOC in Q3FY21E,” it added.
The brokerage estimates IOC’s third quarter GRM at $1.1 per barrel including crude inventory gain of $0.8 per barrel. Indian Oil’s GRM has been hit by a quarter-on-quarter fall in petrol, diesel and naphtha cracks and rise in fuel and losses by $0.5 per barrel.
India’s petroleum product consumption was down 3.7 per cent in November 2020. Diesel consumption too fell 6.9 per cent during the same month and 5 per cent in 1-15 December 2020 but petrol was up 5.1 per cent in November and 9.5 per cent in 1-15 December.