OMCS to register a weak Q2

Sequential rise in refining margins may have provided a cushion

- ARUNIMA BHARADWAJ

STATE-RUN OIL MARKETING COMPANIES (OMCs) - IOC, BPCL and HPCL-- are seen to have posted weaker earnings in the second quarter of the current financial year, due to a sharp fall in the marketing margins of petrol and diesel, after the rise in benchmark crude oil prices.

However, analysts believe that a sequential improvement in the refining margins can provide some cushion for these downstream oil companies in the July-September quarter. Although the OMCS may still have partly recouped the losses reported in the last financial year in the first half of FY24, the prospects are not bright for the second half of the current year.

"We expect a sharp QoQ decline (off a bumper 1QFY24 base) in EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation) for oil marketing companies, as marketing margins on petrol/diesel declined sharply with the rise in crude and product cracks," said Kotak Institutional Equities in a report.

The latter half of the second quarter saw a great volatility in the oil market owing to the production cuts by Saudi Arabia and Russia, in addition to those already in place by the Organization of Petroleum Exporting Countries.

Crude prices, as a result, touched their highest level of $97/bbl since November 2022.