ICICI Securities: Oil And GRMs Fall Post Hurricane But Marketing Margins High
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ICICI Securities Report
Hurricane Laura shut significant U.S. oil and gas output, refining, ethylene and liquefied natural gas (LNG) export capacity.
While oil and gas output recovered rapidly, refining capacity and LNG terminals remain largely shut.
Oil and Henry Hub gas prices have therefore corrected but spot LNG prices are up.
Approximately 0.24 million of barrel per day refining capacity has restarted, 1.4m b/d may restart by September 11, 2020 but 0.67m b/d may take four to six weeks to restart.
Gross refining margins (GRMs) have corrected despite capacity being offline hit by enough spare capacity in the U.S. to make up for shut capacity and weak demand.
GRMs languishing despite shutdowns is worrying but decline in oil and product prices augurs well for auto fuel marketing margins.
Net margins are up from Rs 1.77/ litre on July 01, 2020 to Rs 2.94/litre now and work out to Rs 4.45/litre at latest prices, which is positive for oil marketing companies.
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