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Relief to refiners: Crude oil import price falls below $100 in Aug 1st week

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India’s average crude oil import price in the first week of August fell below $100 at $99.75 a barrel for the first time after it spiked sharply in the month of March ($112.87) after the Ukraine war, and peaked at $116.01 in June.

The development has brought some relief to refiners incurring huge revenue losses on sale of petrol and diesel in the domestic market, but no immediate cut in pump prices of auto fuels is in sight as state-run oilcos are still bleeding hugely on the sale of diesel, two people aware of the development said, asking not to be named.

According to official data, India’s average petrol price benchmark in the first week of August fell 27% to $108.78 per barrel compared to the average monthly peak in June at $148.82 a barrel. The average diesel price, which was $170.92 a barrel in June also fell 24% to $129.72 in the first week of August.

One of the people mentioned above said that while revenue losses on sale of petrol were almost zero, diesel was still being sold almost 10 a litre below the market price. Besides, state-run companies have to recover their past revenue losses on the sale of auto fuels as they paused any fuel price hike in the last four months.

Although public sector firms – Indian Oil Corporation (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) – are free to align pump rates of petrol and diesel with their respective international benchmarks, the government tacitly controls fuel prices due to economic and political reasons.

IOC, BPCL, HPCL and the petroleum ministry did not respond to an email query on this matter.

The three state-run firms that control over 90% domestic fuel trade have suspended their daily pricing policy and frozen pump prices of petrol and diesel since April 7 amid rising inflation.

This has taken a toll on their bottomlines. IOC, India’s largest refiner, posted a net loss of 1,993 crore in the first quarter of the current financial year after having posted a record net profit of 24,184 crore in 2021-22 and a net profit of 5,941 crore in the first quarter of the previous financial year.

HPCL on Saturday reported its highest ever quarterly net loss at 10,196.94 crore in Q1 ended June 30, 2022 as against a net profit of 1,795 crore in the same period previous year due to a freeze in automobile fuel rates, according to the company’s filing with the stock exchange.

The other state-run oil marketing company, BPCL, announced a net loss of 6,290.80 crore in Q1 of 2022-23 on Saturday as compared to the “restated” net profit of 3,192.58 crore in the same quarter last year.

Commenting on the company’s financial performance, BPCL director finance Vetsa Ramakrishna Gupta said: “Despite robust GRM’s [gross refining margin], the company reported a net loss in the first quarter due to heavy losses in marketing business.”

A second person mentioned above said fuel retailers are still cautious about oil price volatility in the international market. “Global oil prices fell due to demand concerns, but this gain could be temporary. We must see the trend for couple of weeks before concluding that international fuel prices have actually softened,” the person working in one of the state-run oil companies said, asking not to be named.

Amid tighter monetary policies of major economies, recession concerns in the UK and signs of demand weakness in China, benchmark Brent crude on Friday closed at a multi-month low at $94.92 a barrel.

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