The profits of oil marketing companies (OMCs) are expected to decline in FY25 due to a decrease in the Gross Refining Margin (GRM) of oil companies. In FY23, Indian oil companies experienced a GRM of $16-$18 per barrel (bbl), which moderated to an average of $10-$12/bbl in FY24. According to a report by CareEdge Ratings, the figure is anticipated to drop further to $6-$8/bbl in FY25.
The report attributes this decline to a narrowing discount on Russian crude and a reduction in product cracks. Despite the lower GRM in FY24, Indian oil companies saw their operating profit increase significantly due to higher marketing margins.
The ministry of petroleum and natural gas reported that the combined profit of OMCs for FY 2023-24 was ₹86,000 crore, which is more than 25 times higher than the previous fiscal year. The report also indicates that marketing margins are expected to decrease due to a reduction in retail petrol and diesel prices by ₹2/litre, effective from mid-March 2024.
Crude oil prices are heavily influenced by the global economic outlook, OPEC’s oil supply management, and geopolitical factors. Prices rose in FY22 as the impact of the COVID-19 pandemic diminished and demand rebounded.
However, the Russia-Ukraine conflict, beginning in February 2022, caused crude oil prices to spike in the first half of FY23. Prices later declined due to a global economic slowdown, sluggish recovery of the Chinese economy, interest rate hikes, and inflationary pressures.
As reported by ThePrint, in August 2023 and April 2024, crude oil prices surged again due to production cuts by OPEC+, mainly led by Russia and Saudi Arabia. Geopolitical tensions in the Middle East have also contributed to maintaining firm crude oil prices.
