NEW DELHI: Oil marketing companies (OMCs) may report losses in the January-March 2022 quarter for holding petrol and diesel prices despite a rise in cost of crude oil in the international market, says a Fitch report.
According to the report, released on Tuesday, to make up for the loss fuel retailers will have to further hike the prices of petrol and diesel to reach pre-November levels. “Retail fuel prices have subsequently been raised by only around Rs 11, implying further price hikes may be required for marketing margins to reach pre-November levels, and early FY23 marketing margins may also be under pressure,” reads the report.
OMCs haven’t changed the price of transport fuel for nearly four months (Nov 2021-March 2022). The report said it is one of the longest retail price freezes in recent years, despite reference crude oil prices rising by nearly $27 a barrel (`13/litre) during the period, which may lead to marketing losses for the OMCs in the Q4FY22.
The rating agency believes robust core refining margins and windfall inventory gains should mitigate potential marketing losses in the near term, and the OMCs may see opportunities to recoup some of the losses in periods of falling oil prices. However, if crude oil prices are sustained beyond Fitch’s base-case assumptions, then record-high retail fuel prices may limit the extent to which the changes are passed on, pressuring OMCs’ credit metrics.