What Saved Oil Marketing Companies In Third Quarter?

The three listed public-sector oil marketing companies—Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd.—managed to report good December quarter earnings due to a jump in inventory gains.

The increase in inventory gains was aided by higher crude prices during the third quarter. Brent Crude, the Asian benchmark, averaged around $61.4 a barrel in the October-December period as compared to $52.1 in the previous quarter.

Had it not been for the inventory gains, the core operational business of these companies would have taken a big hit. Other than IOCL, the other two oil marketing companies–BPCL and HPCL—saw a big fall in core earnings before interest, tax and depreciation and amortisation.

IOCL saw a marginal increase in its operational performance only on the back of 29 percent jump in its refining business. Though the refining business of other two OMCs increased compared to the previous quarter, their Ebitda saw a big fall because of a very weak marketing segment.

In fact, the marketing segment of all the three OMCs declined compared to the previous quarter.

They reported this fall despite sales of petroleum products of all the three OMCs increasing on an average by eight percent sequentially.

The fall was mainly because of lower gross marketing margin earned by the company on sale of every litre of petrol and diesel and restricted increase in retail fuel prices during the state elections in spite of a surge in crude oil prices. A negative impact of GST and the digital discounts that the companies had to offer also weighed on their financials in the third quarter.

However, January 2018 onwards the gross marketing margins have seen an uptick, indicating that the marketing segment performance may improve in the fourth quarter of financial year.