Petrol Diesel Rate: In view of the elections to be held in some states in November-December, Oil Marketing Companies (OMCs) can cut the prices of petrol and diesel by Rs 4-5 per liter from August.
JM Financial Institutional Securities said in a research that while valuations of oil companies appear to be sound, there remains significant uncertainty over earnings in the fuel marketing business. The strong pricing power of OPEC Plus may propel the crude oil price during the next 9-12 months.
Oil companies have high hopes
Oil companies expect crude oil prices to remain below $80/barrel, though this will depend on the government fully compensating for FY23 under-recovery. The report said that the valuation of OMCs is reasonable, but a sharp jump in the price of crude oil during elections can threaten the income.
What will happen if crude exceeds $ 85
If the price of Brent crude exceeds $85 and there is any cut in the fuel price, there could be a threat to the earnings of the oil companies, because the possibility of a cut in the fuel price during elections is very less.
There is a risk of increase in the price of crude oil
It has been said in the report that there is a risk of increase in the price of crude oil. OPEC Plus, given its strong pricing power, will continue to support Brent crude price at US$75-80 per barrel, which is the fiscal break-even crude price for Saudi Arabia.
Oil can be cheaper by Rs 4 to 5 per liter
Oil companies may be asked to cut petrol/diesel prices by Rs 4-5 per liter from August in view of elections in key states in November-December, as the balance sheets of OMCs have been largely streamlined And is likely to post strong profits in FY24.
However, the timeline and quantum of possible cuts have not been mentioned in the report. It will depend on the price of crude oil and the position of the rupee against the dollar.
