BPCL, HPCL, IOCL - Drop In Crude Prices Augurs Well: Prabhudas Lilladher
Crude oil prices have corrected to ~$76/barrel of oil, down ~40% from June-22 highs of $125/bbl post Russia-Ukraine war
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Prabhudas Lilladher Report
Crude oil prices have corrected to ~$76/barrel of oil, down ~40% from June-22 highs of $125/bbl post Russia-Ukraine war due to rising global recessionary concerns amidst rising interest rates (to calm inflationary pressures) despite increasing Chinese demand post relaxation of pandemic lockdown and likely lower supplies from Russia (due to imposition of oil price cap of $60/bbl).
Softening crude prices augur well for oil marketing companies, as at current prices diesel marketing losses turn around to up Rs3.5/litre from H1 FY23 loss of ~Rs 13/litre, while refining margins remain resilient.
We increase our FY24/25E marketing margins on diesel and petrol to Rs 3.5/4.0 (Rs 2.0/3.5 earlier), reduce operating expense (due to likely lower liquefied natural gas prices) and increase earnings by 50-130%.
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