Petrol, diesel price may rise further as Oilcos protect marketing margins

New Delhi: Petrol and diesel prices may have risen in eight of the past nine days, but further price hikes would be needed to keep auto fuel marketing margins of oil retailers high, experts have said.

High marketing margins is required by oil companies to maintain profitability in a market where global oil prices are firming up while refining margins are shrinking.

According to a report by ICICI Securities, auto fuel net marketing margin is has remained at comfortable levels of Rs 4.2 per litre in current financial year (FY21) till date. It has been Rs 3.34 per litre in Q3FY21- till date and Rs 3.59 a litre on November 25, 2020.

However, a rise in international auto fuel prices would have meant net margin fall to Rs 1.05 per litre on December 1 and a negative (-) Rs 0.45 per litre on December 16.

“Further price hikes are required and we are hopeful of the same to ensure net margins remain at Rs 2.0-2.5 a litre,” the brokerage said in its report.

If the oil companies are following this principle of keeping up marketing margin Rs over Rs 2 per litre, petrol and diesel prices could see an increase by that level over next few days. This would mean that auto fuel prices would continue its daily price increase momentum for some more time.

A good thing from the current envelop me to is that, OMCs would also gain substantially from inventory in a rising market. It is estimated OMCs’ product inventory gain at Rs 450 to 880 crore in Q3-till date.