Global Crude Oil Prices Expected to Stabilize Between $75 and $80 per Barrel for the Next Six Months: CareEdge Ratings
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Synopsis
Crude oil prices are expected to stabilize between $75 and $80 per barrel over the next six months, driven by increased global production, particularly from the US, while demand remains subdued due to economic slowdowns. Retail margins for Indian oil companies are set to improve, offsetting reduced gross refining margins.
Key Takeaways
- Crude oil prices projected between $75-$80 per barrel.
- US crude oil production increasing.
- Demand growth subdued amid economic slowdown.
- Retail margins for OMCs expected at Rs 7-9 per litre.
- GRMs for Indian PSUs anticipated to stay between $4-$6/barrel.
New Delhi, Feb 6 (NationPress) Crude oil prices are projected to persist in a range of $75-$80 per barrel over the upcoming six months. This forecast is primarily driven by an increase in global crude oil production, particularly due to enhanced output from the United States. Meanwhile, demand growth is anticipated to remain relatively muted amid a slowdown in major global economies, as reported by CareEdge Ratings on Thursday.
The growing emphasis on Electric Vehicles (EVs) and alternative energy sources is likely to further suppress oil demand.
According to the report, the decline in crude oil prices is expected to bolster retail margins for oil marketing firms like Indian Oil, Bharat Petroleum, and Hindustan Petroleum, which are projected to range between Rs 7-9 per litre.
This rise in retail margins is expected to counterbalance the effects of reduced gross refining margins, with integrated companies that operate in both refining and retail sectors likely to fare better than standalone refiners.
CareEdge Ratings noted a decrease in Gross Refining Margins (GRMs) for Indian public sector oil marketing companies (OMCs) during the first nine months of FY25, averaging $4.8 per barrel, a drop from $11.75 in FY24 and $17 in FY23. This decline was largely due to reduced discounts on Russian crude oil along with decreased product cracks, particularly for diesel, which had previously surged following the Russia-Ukraine conflict.
Looking ahead, CareEdge Ratings anticipates GRMs for Indian PSU OMCs to stay within the $4-$6 per barrel range over the next six months.
The improved retail margins for OMCs are expected to mitigate the impact of diminished GRMs. Integrated players engaged in refining and fuel retailing are likely to be in a more advantageous position compared to standalone refiners. Moreover, favorable retail margins in the domestic market have led Indian operators to concentrate on expanding their retail network rather than prioritizing exports, which were more profitable, especially in FY23,” stated Hardik Shah, director at CareEdge Ratings.
Retail margins on petrol and diesel for fuel retailers have seen a significant increase in Q3FY25, reaching approximately Rs 9/litre, driven by a drop in crude oil prices and a moderation in OMC GRMs.
Given the expectation that crude oil prices will not rise substantially and GRMs will remain stable in the next six months, the blended retail margin is projected to stay healthy in the Rs 7-9/litre range. This situation provides some room for adjustments in the retail prices of petrol and diesel, which have remained largely unchanged for an extended period, the report concluded.
