OPEN APP
Home >News >India >Second wave likely to reverse the trend in auto fuel demand recovery: ICRA

Second wave likely to reverse the trend in auto fuel demand recovery: ICRA

The gross refining margins of the companies are expected to remain muted owing to the disproportionately high fuel prices, and losses and operating expenses on a per-barrel basis at lower capacity utilizations. (ANI)Premium
The gross refining margins of the companies are expected to remain muted owing to the disproportionately high fuel prices, and losses and operating expenses on a per-barrel basis at lower capacity utilizations. (ANI)

  • Capacity utilization and revenues, and profitability of the refining and marketing companies are likely to be adversely impacted owing to demand slowdown

MUMBAI : With the governments of some states, including Maharashtra, Delhi, Jharkhand, and Rajasthan, imposing local lockdowns and curfews to stem the spread of covid-19, the sale of auto fuels and aviation turbine fuel has been impacted, leading to refining and marketing companies reducing throughputs, according to a report by rating agency ICRA.

Going forward, the possibility of such a trend gathering pace—as more and more states resort to lockdowns amid a surge in case count and greater strain on their healthcare systems—cannot be ruled out, it said.

Sabyasachi Majumdar, group head and senior vice president at ICRA said, "Refining and marketing companies are cutting down on capacity utilization, although the demand slowdown is not as severe as in April 2020."

He added that capacity utilization and revenues and profitability of the refining and marketing companies are likely to be adversely impacted owing to the demand slowdown.

The gross refining margins (GRMs) of the companies are expected to remain muted owing to the disproportionately high fuel prices and losses and operating expenses on a per-barrel basis at lower capacity utilizations. Adding to their woes is the international crude oil prices that have remained elevated due to the active production management by OPEC+ countries, leading to elevated levels of fuel and losses.

ICRA added that the Singapore GRMs remain subdued due to the global supply overhang amid a demand slowdown and are unlikely to materially improve in the near term, owing to the second wave of covid in certain large economies such as India and Japan.

Additionally, though many countries have put travel restrictions on flights from India, the mutation, thought to be behind India’s second wave, has spread to at least 10 other countries. As more countries witness a virulent second wave, oil demand and GRMs could be dampened.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout