War-Driven Oil Spike Weighs On OMCs, Q1 Losses Below Govt Estimate
Oil volatility impacts OMCs despite lower Q1 losses.
State-run oil marketing companies (OMCs) reported a sharp decline in profitability during the April-June quarter, with Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) together posting a net loss of Rs 18,149 crore. The losses marked a significant reversal from the combined profit of Rs 16,184 crore recorded during the same period last year. However, the quarterly losses remained far below the Centre’s earlier estimate of Rs 78,481 crore due to fuel sales below market prices during the West Asia crisis.
The losses came amid a sharp rise in crude oil prices during the quarter, driven by geopolitical tensions involving the US and Iran. Petroleum Minister Hardeep Singh Puri had earlier stated that oil retailers faced heavy losses while absorbing the impact of higher global crude prices to protect consumers. Indian crude prices averaged $100.74 per barrel during the April-June period, compared with $83.01 per barrel in the previous quarter, increasing pressure on fuel retailers.
Despite the challenging environment, the financial impact was partially offset by inventory-related gains. Indian Oil Corporation, the country’s largest fuel retailer, reported that losses from selling petrol and diesel below cost were highest at the beginning of the quarter but reduced as crude prices eased, retail fuel prices were adjusted and excise duty was lowered. The company also benefited from gains on finished-product inventories, which were estimated at around Rs 15,000 crore, helping reduce the overall impact of the losses.
Also Read: Uzbekistan's Foreign Minister Calls On President Murmu, Discusses Bilateral Cooperation
Among the three companies, HPCL recorded the highest quarterly loss of Rs 11,526 crore compared with a profit of Rs 4,371 crore a year earlier. BPCL reported a loss of Rs 3,963 crore against a profit of Rs 6,124 crore, while IOC posted a loss of Rs 2,661 crore compared with a profit of Rs 5,689 crore in the corresponding period. HPCL said it had maintained higher crude and product inventories during the West Asia crisis to ensure uninterrupted fuel supplies, but the subsequent decline in crude prices resulted in inventory losses.
Domestic LPG sales continued to weigh heavily on the performance of oil companies despite improved refining margins. HPCL reported LPG under-recoveries of around Rs 510 per cylinder during the quarter, rising to Rs 680 in June before declining later. The company’s cumulative uncompensated LPG losses increased to Rs 16,400 crore by the end of June. BPCL and IOC also reported higher LPG under-recovery burdens despite government compensation support.
Oil companies expect some improvement in the July-September quarter as crude prices stabilise and lower-cost inventories purchased after the price correction begin supporting margins. IOC expects LPG under-recoveries to average around Rs 250 per cylinder in the current quarter if Saudi contract prices remain at current levels. However, future earnings will continue to depend on global crude prices, geopolitical developments and government policy decisions on fuel pricing.
Also Read: Cauvery Row Escalates As Tamil Nadu Seeks SC Intervention Over Water Sharing Dispute
