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Petrol, diesel price may rise further as Oilcos protect marketing margins
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SME Times News Bureau | 28 Nov, 2020
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.
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