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    State refiners' earnings expected to surge in Q1

    Synopsis

    A record net auto fuel marketing margin of Rs 6.11 per litre in the April-June quarter.

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    HPCL and BPCL would make a product inventory gains of Rs 550-850 crore during the quarter against a loss of Rs 20-130 crore in the year-ago period, according to the brokerage.
    New Delhi: State-owned oil refiners are expected to report a surge in earnings as record marketing margins, inventory gains and higher refining margins more than make up for sales lost during the first quarter, analysts said.

    Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) are expected to more than triple their earnings per share, while Indian Oil may see a 37% increase from a year earlier, according to estimates by ICICI Securities.

    A record net auto fuel marketing margin of Rs 6.11 per litre in the April-June quarter, up 3.3 times from the year-ago period, will drive the earnings surge, the brokerage said. The gross refining margin for BPCL and HPCL is estimated to rise 2.1-9.3 times to $5.9-6.9 per barrel, while it may decline 9% to $ 4.3 a barrel for Indian Oil.

    HPCL and BPCL would make a product inventory gains of Rs 550-850 crore during the quarter against a loss of Rs 20-130 crore in the year-ago period, according to the brokerage. Indian Oil may make a smaller product inventory gain of Rs 256 crore.

    HPCL and BPCL are likely to have a crude inventory gain of $0.6 per barrel while Indian Oil will have a loss of $0.1 per barrel during the quarter. Indian Oil, with a larger refining capacity than its peers, holds a far higher level of inventory. IOC’s refineries operated at a lower capacity than those at BPCL and HPCL.
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    Higher fuel marketing and refining margins would easily offset the 26-28% year on year decline in sales volume for the state refiners during the quarter.

    Refineries are fast recovering from their low utilisation rate during the April lockdown. Indian Oil, the country’s largest refiner, expects to reach a run rate of 90% by the month-end. HPCL and BPCL are already operating at more than 90% capacity.

    Recovery in domestic oil demand has also gained momentum. The fall in sales narrowed to 12% in June from a year earlier. In April, the decline was 46%.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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