OMC marketing margin squeezed as crude rises

India’s oil marketing companies (OMC) have had a dream run over the past three quarters as far as their gross marketing margins are concerned. The sharp fall in crude oil prices over the summer due to the Covid-19 pandemic and the decision by the companies to hold retail prices unchanged citing demand destruction left them with record high marketing margins for the larger part of the previous year.

However, the recent rise in crude prices over the past few weeks and already record-high fuel prices have forced gross marketing margins below the ideal Rs 3 per litre for the first time this financial year. “Retail auto fuel prices in India have reached all-time highs, thus restricting gross marketing margins to Rs 1.7-2.7/lit (v/s Rs 4.5-5 per litre in 3QFY21).

However, gross marketing margins in FY21 till date still average Rs 6.5-7/lit (well above the long-term average of ~Rs 3/litre),” Motilal Oswal Financial Services said in a report recently.

New Indian Express
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